The global pandemic has changed our lives. As we stay home and adjust our lives to suit our new physical and financial realities, many of us are wondering about our financial future. Every week I hear from Members asking important questions: What will happen to my investments? How can I plan for life after the COVID-19 crisis? The good news is you can plan for life after the pandemic.
Weathering the storm and sailing into smoother water
Choppy waters: The volatile market
COVID-19 has impacted the global economy and markets are reacting by rising and falling. Volatility is nothing new in the markets. Investments prices have fluctuated because of events in the past. We may not know how long business closures and other social distancing measures will impact the economy, but we do know the economic impact of this pandemic will pass. So too will this period of market volatility.
Charting a course: Is it time to change tack?
Last week I spoke to a Member about being patient in these uncertain times. Adhira called me in a panic about her investments. At the age of 46, Adhira had finally had enough flexible income to start investing for her retirement two years ago. In addition to setting up a pre-authorized contribution (PAC) to contribute to her personal, balanced investment portfolio, Adhira also started investing in her children’s education with annual RESP contributions.
With her children being aged 12 and 14, Adhira was worried: “Should I stop contributing? My daughter will need this money to go to school in 4 years. Should I pull the investments now?” After taking a few deep breaths together, I reassured Adhira that the market volatility and recession hadn’t eaten into her or the government’s RESP contributions. I also told her not to worry about her balanced portfolio. I suggested Adhira complete our budgeting tool and we assessed her cash flow. Thankfully, we found that she had the cash to stick with her existing investment plan.
To help Adhira understand the benefit of sticking with her plan, I reviewed a few key points. Every situation is unique, but some of these ideas may spark a discussion with your advisor to help you chart a course for a more stable financial future.
See the big picture.
You should know that downturns in markets are normal and typically short term. As the US stock market has shown, markets can recover from declines and still provide investors with positive long-term returns. It is important to remember that time in the markets beats market timing.
Stick it out.
The key is to stick with your investments and invest regularly. If you do, short-term downturns won’t have as much impact on your overall performance. Trying to move in and out of the market -- pulling out your investments now and reinvesting later -- can be costly. If you pull out your investments to miss the storm, you’ll also miss the potential returns that come during the recovery days. But if you remain invested, and continue to invest, you could benefit from the long-term uptrend that happens in the markets after this tsunami subsides.
Get comfortable with your investment strategy.
Your investment portfolio should reflect a risk level that works for you. Riding an ocean of surging waves may not seem like a risk worth taking for you, but what if you have a sturdy boat and an able guide? Work with a wealth advisor to assess your time horizon, goals, and tolerance for risk to ensure you have an investment strategy that works for you. Balanced, aggressive, or conservative – every strategy is different and it’s important to find the right fit for you.
Trust an Advisor.
Managing investments can be stressful in the best of times, never mind these chaotic times. You may want to consider an all-in-one fund or professionally managed account for your longer-term goals, such as retirement. You can trust a Wealth Advisor to help you manage it all. Working with a Wealth Advisor to craft the right long-term investment strategy is like having a personal lighthouse. It can guide you to the shores you want to reach.
In this time of uncertainty, one thing is certain: you can trust PenFinancial. No matter what your situation, rest assured that our community will weather this storm, - we can rely on each other. We’ll come out of this stronger together.
The information contained in this article was obtained from the sources believed to be reliable; however, we cannot guarantee that it is accurate or complete. This article is provided as a general source of information and should not be considered personal investment advice or a solicitation to buy or sell any mutual funds. Mutual funds are offered through Credential Asset Management Inc. Mutual funds and other securities are offered through Credential Securities, a division of Credential Qtrade Securities Inc. Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments and the use of an asset allocation service. Please read the prospectus of the mutual funds in which investment may be made under the asset allocation service before investing. Unless otherwise stated, cash balances, mutual funds and other securities are not covered by the Canada Deposit Insurance Corporation or by any other government deposit insurer that insures deposits in credit unions. Mutual funds and other securities are not guaranteed, their values change frequently and past performance may not be repeated. Credential Securities is a registered mark owned by Aviso Wealth Inc.
The key takeaways were inspired by: https://www.fidelity.com/viewpoints/investing-ideas/six-tips