Coronavirus Cost Me 40% of My Portfolio. Now What?

We know it’s tempting to make changes to your portfolio during market downturns. We hear you. It sounds counterintuitive to do “nothing.” But making sudden changes can create lasting damage to your portfolio. Instead, consider taking action here:

Take a step back: what you see in the news probably only represents a portion of your portfolio.

For example, let’s say you have 70% of your portfolio that is riskier (i.e., stocks) and about 30% that is safer (i.e., bonds). Year to date, as of March 27th market close, the S&P 500 Index is down by 22%. Does this mean you lost 22% of the value of your portfolio? No. Chances are, only that 70% of your portfolio dropped by 22%, meaning that your portfolio is down ~15.5%. Still not great, but not as bad.

Keep it in perspective: the stomach churn is part of reaching your long-term goals.

When folks say “risk is necessary for gains,” today’s environment is what that risk feels like. We’ve been riding a high for years; it’s natural to feel shaken by our first major market downturn. But, downturns are part of the economic cycle. A diversified portfolio is designed to weather the ups and downs created by world events.

When do you need to meet your goal?

What is your “time horizon” or number or years to reach your retirement goal? If your time horizon is 10+ years, this will likely feel like a minor shock in time. It’s hard to travel through right now, but your portfolio should recover. If you are seeing major portfolio losses and it’s time to retire, watch our webinar on Retirement 2020 - Should You Delay?‍

Selling at a loss means you get to keep that loss.

You don’t need your retirement money now, so don’t sell it now. Doing so only solidifies the losses in your portfolio. Remember, you need money to get through retirement, not just to retirement. Also, consider delaying financial to-dos such as rolling over your old retirement plan or consolidating investment accounts.

Check in with your budget.

If you’ve historically lived paycheck-to-paycheck or spend more than you make, find ways to trim right now. Or, if you have excess monthly cash flow and enough cash savings (see below), now may be the perfect time to increase your retirement savings contributions. In this way, you are getting to buy what’s on “sale” while the markets are down. You also don’t have to worry about timing the market for the “bottom” because you’ll be buying in every couple of weeks.

Check your cash savings.

Consider temporarily postponing unessential big-ticket items that will leave you cash poor (i.e., buying a car, down payment on a house, etc). We’re recommending you have closer to 6 months of cash reserves.

Evaluate if your current risk tolerance makes sense.

If you can't stomach the markets' ups and downs, then it could be time to adjust your long-term investment strategy. We're not talking about temporarily selling to cash during market volatility. If you are tempted to do that now, it could be a sign that your portfolio has too much overall risk exposure. Adjusting your portfolio mix should be done over time and not just as a response to market uncertainty. Remember, investing is a long game and you want to ensure you have enough 'risk' in your portfolio to benefit from the upside to help you meet your goals.

We’re here for you.

We’re here to help you sort through the white noise you hear on the news. Continue to take care of yourself and your family, but understand you have us a sounding board as we all continue to get through the changes and challenges that COVID-19 brings.