The Best Financial Advice During Times of Uncertainty

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This month’s bear market plunge has cast an enormous cloud of uncertainty onto many Americans’ financial futures. According to the LendEDU survey, 63 percent of respondents were worried that coronavirus and its impacts will seriously damage their retirement savings and plans.

In my opinion, the best thing for you to do with your stock market investments right now is to hold onto them.  

A good historical example comes from the market crash of 2008. If you invested $10,000 into a broad S&P 500 index fund on Jan. 1 of that year and held it until the market bottomed in March of 2009, you would have seen a near 29-percent decline in your investment. But if you stayed on course and held your investment through that bottom until today, you’d be sitting on a 244-percent gain!

Of course, holding onto your stocks when the market is falling is easier said than done. But the truth is being a stockholder comes with risk — and it’s because of that risk that stocks have historically commanded a price and return premium over bonds. It’s been so long that stocks have fallen that many investors may have forgotten that relationship.  

Now, alas, is the moment when the bill for that risk premium has come due. And while it might feel more comfortable to skip out on the tab by moving from stocks into bonds, I’d strongly caution against it with interest rates on government securities nearly in negative territory.

Your best course of action right now is to stay the course — in stocks. 

Unfortunately, I’ve found over the years that many people’s investment portfolios aren’t connected to a financial plan that allows them to stomach market volatility. The best time to prepare for a market decline is before it happens … not while it’s occurring. If you’re scared about “what to do” now, I’d recommend talking to a professional financial advisor.  

At my firm, Capital Asset Management, we invest independently, avoid trends and hire professional money managers who build portfolios that will weather even the worst storms during scary times. We know that slow and steady really — truly — does win the race. And that’s not just me talking. I’ve got history to back me up.   

Author of “Take Back Your Money” and “The Ten Truths of Wealth Creation,” John E. Girouard is a registered principal of Cambridge Investment Research and an investment advisor representative of Capital Investment Advisors in Georgetown. 

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