FPS & Coronavirus: Short-term volatility: What's your move?

| March 12, 2020
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Yesterday, the World Health Organization declared the COVID-19 coronavirus outbreak a global pandemic. At Financial Plans & Strategies, we view the health and safety of our clients and employees as a top priority. We wanted to provide you with an update on how we are handling the outbreak and offer guidance on current market conditions.

 

However, we are taking precautions and adjusting how we do business. For the next few weeks, all in-person client meetings will now be conducted virtually or by teleconference. Instead of visiting our offices, please contact us by phone or email as we are trying to limit face-to-face to contact.

FPS has always encouraged employees to stay home if they are not feeling well, but now this is a requirement. If our employees feel well enough to work but wish to limit in-person contact, we have the capability to work from home.

We will continue to closely follow the guidelines provided by the World Health Organization and the Centers for Disease Control and adjust our business practices as needed to try to keep our clients and employees safe and healthy.

FPS anticipates a period of extreme market volatility, but as always, we take the long-view and are here with you as we weather the storm.

During these times it is crucial to stay the course so that a short-term decision does not impact your long-term plan. It is important to maintain diversification, and as your investment managers, we are using down days in the market as a rebalancing opportunity. This allows us to maintain your long-term plan and purchase mutual funds heavier in stocks while they are cheaper.

For more information on how the market has reacted in similar outbreaks, please see the article included below.

 

Finally, FPS recommends several positive actions you can take during this time.

  1. Invest! If you have earned income or if you have extra money in savings, now is a great time to contribute to your investment plans.
  2. Roth conversions: if you a) are interested in leaving an inheritance, b) think you are in a lower tax bracket now than you will be in retirement, or c) have an income level that prohibits you from contributing to a Roth IRA in the traditional way, you might consider a partial conversion of your IRA to a Roth IRA.
  3. Refinance your home mortgage: interest rates are at all-time lows. While refinancing might seem like a hassle, consider the savings in interest over the life of your loan. We can refer you to a mortgage lender if you are interested.

 

If you have any questions about how Financial Plans & Strategies is working for you during this time, please call our office at 317-882-7675.

Short-term volatility: What’s your move?

The financial markets don’t like bad news. The current coronavirus outbreak is no exception, and many investors are tempted once more to “do something.” But in times of volatile markets, the best move of all for long-term investors is often no move at all. 

While they’re not exact parallels, the stock market responses to the SARS coronavirus in 2003 and the Zika virus in 2016 offer useful lessons. In both cases, investors who sold on bad news and falling prices missed significant rebounds that very shortly had stock markets back to prior levels. 

There’s no guarantee that today’s market will play out the same way; stocks have also taken days, months or longer to regain losses. But remember that knowing when to get back in is just as hard as knowing when to get out. The investment strategy I’ve mapped out for you is a long-term plan based on your personal goals and circumstances. Should those change, let’s talk about whether an adjustment to your strategy is warranted.

Source: Vanguard calculations, based on data from FactSet. 

Notes: U.S. stocks are represented by the S&P 500 Index. U.S. bonds are represented by the Bloomberg Barclays U.S. Aggregate Bond Index through December 31, 2009; Bloomberg Barclays U.S. Aggregate Float Adjusted Index thereafter. 

The performance of an index is not an exact representation of any particular investment, as you cannot directly invest in an index.

Past performance is no guarantee of future results.

All investing is subject to risk, including the possible loss of the money you invest. Be aware that fluctuations in the financial markets and other factors may cause declines in the value of your account. There is no guarantee that any particular asset allocation or mix of funds will meet your investment objectives or provide you with a given level of income. We recommend that you consult a tax or financial advisor about your individual situation.

Investments in bonds are subject to interest rate, credit, and inflation risk.

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