The arrival of COVID-19 has turned
the world upside down over the past few months and that includes many people’s
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, often
that has had more to do with the overall 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 the set income that 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
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 from your investment 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 of no more than 60% of your
money in stocks.
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.
With the pandemic having made remote work the norm overnight, certain companies
and services have benefitted from the change and are likely to continue
performing well. For example, online video services, contactless food delivery
services and online marketplaces are being relied on by consumers like never before.