Common Investor Questions During the Coronavirus Pandemic
How will the Coronavirus pandemic affect my wealth portfolio?
The North Bay Business Journal recently included Montgomery Taylor Wealth Management in a Q&A article featuring 16 common questions investors are asking during this unprecedented time. You can read the article in its entirety here, but it got me thinking: What do Sonoma County investors need to know right now with everything going on?
Surprisingly, we are receiving very few calls at the office right now, and I think this is because we educate our clients on our investment management process and how we manage risk in particular. We also send out regular email communications. (To sign up to receive our monthly blog updates, click here.)
With that said, there are a few things I want to share that may be of help. Below are my answers to some of the reporter’s important questions.
Q: How does one access wealth in these times?
If you have a financial plan in place, you simply follow the plan. A bear market should not throw you off or make you change your retirement plans. However, if you were wanting to pull a lump sum out for your portfolio right now, it may be best to wait until the market and your investments rise.
Q: Do you have general advice for clients as it pertains to getting into or remaining in the stock market? If they’re wanting to buy, what types of industries look good? If they’re wanting to sell, what would you tell them to get out of?
In 2008, and again now, many investors contemplate pulling out of the stock market. Most advisors tell you to stay put. Now imagine I am outside in a blizzard and someone tells me to stay put – because “if you wait long enough, the sun will come out.” It is absolutely true, but it is not helpful.
Therefore, my way of managing investment risk is to make tactical asset allocation adjustments as the economy and stock market conditions change. I don’t just ride the rollercoaster. I pulled back our exposure to stocks in the beginning of March. If you haven’t already done that, you may as well stay in now. I suspect we will find the market bottom within a couple of months. I’m not one to panic, but if you are, the secret to panic selling is to do it before everyone else! (If you want to discuss your specific concerns, contact us. We’re here for you.)
Q: Are you advising clients looking to buy to not wait for the bottom because they’ll miss it?
I’m advising clients to hold for a little while longer. The best buying opportunity is not here yet. However, they need to have their cash in the stock account and ready to go.
Q: Along those lines, is there any place to hide in terms of making shifts in the portfolio or should buyers and sellers expect every investment will undergo swings?
Investments have risk. They can all fluctuate. If you want stability while you wait out this bear market, you can put your money into short-term treasury bonds.
Q: Plus, should market players consider specifically buying or selling bonds or government issuances?
Government bonds are a good place for part of your portfolio. Long-term bonds are more volatile than short-term bonds. This is why, right now, I like iShares Short Treasury Bond ETF (SHV), which holds U.S. Treasury bonds with maturities between one month and one year.
Q: How do you see the outcome of this crisis once the pandemic curve has flattened in the United States and Americans push toward a sense of normalcy?
Once the Coronavirus panic is over, investors will return to their usual buying habits and drive the stock market back up. This will be a wonderful buying opportunity to make money in the stock market. How will we know when the bear market is over? This is what I’m watching for:
- Bear markets never end on good news.
- Markets bottom before the economy turns around.
- When prices are at severe discount, markets bottom.
- The best sign of a market bottom is panic selling.
The Montgomery Taylor Wealth Management team has 40 years of combined experience helping busy families in the Sonoma County area with their financial planning needs. In that time, we have seen several different markets and understand investors have questions.
We are here for you and are happy to discuss your individual concerns one-on-one, whether you’re a current client or not. Contact us to schedule a time to talk.