Safeguarding Your Portfolio From COVID-19 Infection

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.