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A Further Look | May 20, 2020

Safeguarding Your Portfolio From COVID-19 Infection

David B. Root, Jr.


COVID-19 has created an atmosphere of fear, anxiety and even panic for investors and savers. As a result, financial advisors have been on call 24-7 to answer their clients’ questions about the market downturn and its extreme volatility. There has never been a more profound example of the importance of the personal relationship between advisor and client.

With proper planning, the partnership can ensure that even in the face of a severe setback like the current COVID-19 market drop, personal disaster can be avoided. For the benefit of the reader, I’d like to share some of the challenging issues our clients faced, which were impacted by COVID 19.

Like many people, one of our clients became very concerned about the impact of the falling stock market on their education accounts meant to pay for their children’s college. They were concerned that the market was reversing all of the gains they worked so hard to achieve over the past several years of saving. Certainly, they thought, they would be sacrificing at least a semester of tuition as a result.

In an effort to avoid problems like this, we rebalance certain clients’ portfolios to be more defensive and contain less risk when there are concerns about economic growth and inflation. By increasing a client’s position in bonds and cash (mutual funds), an education account has the opportunity to achieve positive returns amid the coronavirus “crash.”

Another client was forced into retirement last year. He was smart and disciplined in saving for his retirement, and didn’t need to panic. Instead, he was able to take some of his gains realized in his retirement plan, and invest in a financial plan. When we create a financial plan for a client whose retirement window has narrowed, we strive to create the optimal mix of bonds, stocks and cash that is designed to attain his/her income goals with only a 4 percent draw down annually from savings.

Yet another client had saved to put herself into a high-end assisted living facility on her own terms. When clients have a short-term horizon for their transition to a new living situation, we work with them to sell their assets. Typically, we liquidate these assets over a two-year period to realize significant tax savings. When clients will need to tap their nest egg within a short time frame, our goal is to ensure that they are unaffected by an economic downturn like the one we’re experiencing now.

While everyone hasn’t weathered the storm this well, there is a great opportunity to learn the lessons of an unexpected catastrophic event. It underscores the importance of personal advice delivered by someone who knows your situation. A knowledgeable, trained advisor can help guide you to avoid future events…and there will be future events.

Even in the face of tremendous adversity, it doesn’t have to be a disaster for you and your financial future. During this difficult time, the increasing demand for personal advice has led our firm to actually hire two new key employees recently.

While no one can say they predicted the scale of what has happened in 2020, it paid to be cautious when economic signals began to change in 2019. Discuss your personal situation – risk tolerance, retirement runway and other key factors with your advisor. You may find reducing risk in your portfolio and allocating funds toward a solid financial plan could be your best insurance against future COVID-19-like events.

Thanks for reading.

This material has been provided for general, informational purposes only, represents only a summary of the topics discussed, and is not suitable for everyone. The information contained herein should not be construed as personalized investment advice or recommendations. Rather, they simply reflect the opinions and views of the author. D. B. Root & Company, LLC. does not provide legal, tax, or accounting advice. Before making decisions with legal, tax, or accounting ramifications, you should consult appropriate professionals for advice that is specific to your situation. There can be no assurance that any particular strategy or investment will prove profitable. This document contains information derived from third party sources. Although we believe these third-party sources to be reliable, we make no representations as to the accuracy or completeness of any information derived from such sources, and take no responsibility therefore. This document contains certain forward-looking statements signaled by words such as "anticipate," "expect", or "believe" that indicate future possibilities. Due to known and unknown risks, other uncertainties and factors, actual results may differ materially from the expectations portrayed in such forward-looking statements. As such, there is no guarantee that the expectations, beliefs, views and opinions expressed in this document will come to pass. Information presented herein is subject to change without notice and should not be considered as a solicitation to buy or sell any security. All investment strategies have the potential for profit or loss. Asset allocation and diversification do not ensure or guarantee better performance and cannot eliminate the risk of investment losses. The impact of the outbreak of COVID-19 on the economy is highly uncertain. Valuations and economic data may change more rapidly and significantly than under standard market conditions. COVID-19 has and will continue based on economic forecasts to have a material impact on the US and global economy for an unknown period.

David B. Root, Jr.


Founder & Chief Executive Officer

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