The Investments You Should Be Making Right Now… - Slimmer Payments

The Investments You Should Be Making Right Now…

With the markets spinning like a weathervane in a hurricane, you may think now is not time to be investing. However, every crisis also brings with it some opportunity.

There are some moves you should be making in the market right now to not only protect, but possibly even improve, your portfolio.

Despite steady drops (with some recoveries) since the pandemic occurred, most investment experts say it is best to “white knuckle” it and ride out the volatility in the markets.

That having been said, the reality is, as states are only just beginning to reopen, it may take a good couple of years for the stock market to fully recover from the sharp declines caused by the continued spread of COVID-19.

For investors with a well-diversified portfolio, who have cash on hand for emergencies and short-term needs, it’s best to stay the course.

However, if your financial situation is a little less secure, and you feel you may need to tap into your assets, you may need to take some steps, such as shifting some money from stocks to bonds or cash. If that is the case, here are three strategies the experts say you should consider right now.

1. Review Your Asset Mix

Chances are you haven’t updated your portfolio allocations lately. Few 401(k) investors make any changes after signing up. But what was right for you in your 20s or 30s may be too aggressive in your 40s or 50s, when your investing time horizon is much shorter.

For example, Tom Fredrickson, a certified financial planner in Brooklyn, NY says, “if you hold, say, a 70/30 stock-and-bond mix, consider shifting to a 60/40 or 50/50 allocation instead, which would limit your losses. By scaling out of stocks, you will also be locking in some of your profits.”

2. Rebalance Your Portfolio

Fredrickson goes on to say that “choosing an asset mix does you no good if you don’t maintain it through rebalancing.” Someone who started in 2012 with a 60/40 stock-and-bond mix and failed to rebalance might have closer to a 70/30 mix today, as a result of the big gains in stocks and modest returns on bonds.

Though a sustained market decline could bring your portfolio closer to the original allocation, a better strategy is to rebalance, says Fredrickson. “To do this, sell just enough of your winning investments and add that money to your laggards to bring your portfolio back to its original allocation or to the one that’s right for you today.”

3. Step Up Your Saving

Although you may not be able to earn hefty returns in the coming years, there’s one key factor you can control, says Fredrickson, and that is your savings rate. “Boosting the amount you stash away means you will be less dependent on high returns to reach your financial goals. And you don’t have to take a lot of risk to get there.”

He suggests that you automate your contributions, starting with your 401(k) plan, and try to put away the max, which is $19,500 in 2020. (Those 50 and older can put away an additional $6,500.) For IRA investors, the max is $6,000; those 50 and older can contribute an additional $1,000.What do you think of these tips? Are there any financial moves you are making during the crisis that we have not covered that you would like to share?

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