Volatile markets due to pandemics, geopolitical events, and fiery news can put even the most steadfast investors on edge. Clickbait headlines like “S&P 500 Plunges” or “Dow Tumbles” can cause anxiety but often a closer reading reveals the market is down less than 1%. Taking control of your financial life through some action items can help relieve stress in uncertain times.
Action items that may apply to your situation:
- Call your CERTIFIED FINANCIAL PLANNER™ professional to check in on your financial plan if it has been more than a year since your last review. Are your goals still on track? A well-developed plan already accounts for swings in the stock market and is stress tested through modeling significant downturns.
- Discuss your investment strategy and asset allocation with your advisor. How is your account allocated and performing in the current market? Is it within the expected range of returns for the level of risk in the portfolio?
- Revisit your emergency reserves: Evaluate whether you are holding at least six months of your expenses as cash in your checking and savings account.
- Evaluate converting your IRA assets to Roth. Are you in a lower tax bracket today than you might be once the Tax Cuts and Jobs Act sunsets in 2025? Converting IRA positions to Roth while prices are depressed can mean more assets into Roth at a lower dollar amount and therefore lower tax price tag.
- Examine your risk management strategies. Look at your liability coverage in case you need additional coverage through an umbrella policy. Ask your advisor to run a life insurance needs analysis to make sure your family is covered in the case of unforeseen events. Make sure you have a plan for long-term care whether that be self-insuring or obtaining coverage.
- For those individuals with a longer time horizon to meet their goals, consider increasing your contributions to your retirement or brokerage accounts to potentially invest at a discount.
- For those actively drawing from their portfolio, can you ease back on your monthly draws during this more volatile period? It’s often not necessary if you are properly diversified, but if you have any extra room in the budget and a bulky emergency reserve, it is worth considering slowing the rate. Accounts with active monthly distributions should include a cash buffer for short-term swings in the market.
- Go outside. Don’t forget to take a break from your phone and take a walk, hit the trails, the slopes, the river, spend time with family, or do whatever makes you happy. If you have a properly allocated investment management strategy, a well-developed financial plan, and a professional watching your back, know you have planned for this.
Never hesitate to call your financial advisor for informed and reassuring guidance. Our experts will continue to keep our readers and clients informed as we see increased volatility in 2022.
Connor Michael, CFP®