The arrival of COVID-19 has turned the world upside down over the past few months–including many people’s investments.
With the onset of social distancing and the shutdown of businesses across the country, many investors saw the value of their retirement savings plummet. Though the market has since rebounded, it is unclear how it will perform if predictions for a second wave of the coronavirus prove to be true–particularly if that wave is worse than the first. Given such uncertainty, now is the perfect time to reexamine your investment approach.
Whether retirement is in your near-term future or still quite a way off, the pandemic’s impact on investments across the globe signal that it’s time to revisit the allocations within your investment portfolio and ensure that you aren’t carrying too much risk. While many people’s investments have consistently outperformed over the past decade, that has had more to do with the strength of the market as a whole than it has with people’s specific investment allocations. And with economists predicting that the U.S. is headed not just for a recession, but an outright depression, now is the time do any re-weighting of your investments that may be needed.
The first thing you should do is to sit down and tally up what set income you know you will have coming in once you retire, such as social security and any sort of annuities you hold. If that income isn’t sufficient to cover the expenses you anticipate, including padding for any unforeseen issues such as health problems, you should consider sitting down with a qualified financial advisor to determine how you can bridge that gap.
Equally important is safeguarding your investments as a whole against a market downturn. If retirement isn’t far off, now is probably the time to shift a larger portion of your investment money out of equities and into more stable investments such as municipal bonds. Though the upside for bonds isn’t necessarily as high, the safety of knowing exactly what you can expect to be paid out to your money market investment account is important.
Regardless of how far you are from retirement, it is important to remember that bull markets don’t last forever, and the one we have been in for the past decade was already due for a downturn prior to the arrival of COVID-19. So if your investment portfolio has been skewed more toward equities over the past few years, you should probably shift things back toward a more conservative approach by placing no more than 60% of your money in stocks for your retirement plans.
It is also the perfect time to take a closer look at which stocks you are invested in. Trying to time the market is never a good idea, but what does make sense is taking into consideration which stocks are most likely to benefit from the long-term impact of the coronavirus. Certain companies and services have benefitted from the pandemic having made remote work the norm overnight and are likely to continue performing well. For example, streaming video services, contactless food delivery services and online marketplaces are being used by consumers like never before.
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