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Your financial plan and the coronavirus

Should I be doing anything differently with my retirement accounts given the impact of the coronavirus pandemic on the markets?

First, I’d recommend speaking directly with your financial planner, who can give advice specific to your circumstances. To answer your question, for most investors, the answer would be no. Assuming you’re working with a financial planner and your investments are tied to a plan designed around your time horizon and investment objectives, the best option is to hang tight. Making a dramatic shift from stocks that are already down, say, 25 percent to cash is like putting breaks on a car after the wreck. Other factors may impact your specific situation, including whether you have an emergency fund in place and the status of your job security. If your allocation in equities has been too high relative to your time horizon, then, yes, some adjustments should be discussed with your financial planner. For many long-term investors, it makes sense to consider Roth conversions during a down market to pay the taxes now on diminished values, making the future values tax free upon access after age 59½. Additionally, down markets can be a good time to work with your financial advisor to add funds to your investment accounts to purchase assets at a discount. Goal-oriented, long-term investors should welcome times like this to take advantage of lower costs in acquiring assets, or in tax planning on already owned assets. Consult your financial advisor and CPA to find out what strategy would work best for you.

Would it be prudent to move to cash and wait for the bottom?

This is one of the most common myths about investing. The reality is that it is difficult, if not impossible, to regularly predict the top or the bottom of the market. If you go back to the Great Recession, at a time when things were at their worst, you’ll see that no one predicted the tremendous rebound that we saw for the remainder of 2009. Every year since, there has been article after article warning of the looming market crash. Instead, we enjoyed a 12-year bull market. Investors who obtain the greatest long-term return don’t make long-term investment decisions based upon short-term market volatility. They invest as a part of a financial plan, which often includes dollar cost averaging into the market during volatile times.

Are there any other takeaways or lessons to learn from the coronavirus and its impact on the markets?

Yes, I would say it’s a great reminder of the importance of an adequate emergency fund. It’s also a reminder of why, as we get closer to retirement, it’s important to consider shifting from aggressive portfolios to more balanced portfolios that are better designed to absorb market shocks like this. It’s also a reminder of why working with a financial planner and a financial plan is important. As as advisor, I sometimes play the role of a behavioral coach as much as I play the role of an financial advisor. It’s times like these that having good council is more important than ever.

David Mann, CLU, CFP is a wealth management advisor based in Las Vegas. Visit his website, davidmann-nm.com. To contact him, email david.mann@nm.com or call 702-734-4425.

John Alcantara, CLTC, is a wealth management advisor based in Las Vegas. Visit his website, alcantarafinancialgroup.com. To contact him, e-mail john.alcantara@nm.com or call 702-734-4459.

No investment strategy can guarantee a profit or protect again a loss. All investment carry risk including the loss of principal.

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