“With everything going on, how bad will the markets get?” a client asked me recently. We were examining his U.S. brokerage portfolio, including his IRA (Individual Retirement Account), and measured the balance he had between stocks, bonds, and cash. Lacking prophecy, I asked him a question back, “What are the top three reasons you think the markets will drop?” “Easy!” he replied, and ran through his list of why the markets might fall:
Why the markets might fall
- Corona
- Riots
- November’s U.S.presidential election
When will the economy suffer from the turmoil?
After he presented his list, I asked him what the timeline for the fallout from these events would be. “I suppose in the next six months or so,” he responded. Finally, I asked, “When do you expect to use the money in your U.S. investment portfolio?” He replied, “Doug, I’m 50. I’m not going to touch this money for 20 years or more.”
The truth about long-term investors
If someone is a long-term investor, not planning to withdraw from his portfolio for decades, today’s shocking events will be ancient history by the time he uses the funds. The question of how bad will the markets get may have limited repercussions on a long-term investor. Odds are high that when this investor starts to draw from his investments, memories of the pandemic, riots, and the 2020 election will be dim. In fact, he might not even recall other factors that shook the economy, like governmental debt, or today’s disruptive technologies. If you want to be a long-term investor, then stop fretting over the events of today.
Don’t say you’re a long-term investor if you’re not
On the other hand, don’t act confident about the markets if you need to use your funds in the near-term. Any of the current crises can explode and cause a huge market crash. No one can tell you when. If you need your money soon, don’t risk it in the market.
If you want help in determining if your portfolio is responsibly invested given the current economic situation, be in touch (02-624-2788).
Douglas Goldstein, CFP®, GFP®, is the director of Profile Investment Services, Ltd. www.profile-financial.com. He is a licensed financial professional both in the U.S. and Israel. Call (02) 624-2788 for a consultation on how to set up your American assets to meet your financial goals. Securities offered through Portfolio Resources Group, Inc. Member FINRA, SIPC, MSRB, FSI. The opinions expressed are those of the author and not those of Portfolio Resources Group, Inc. or its affiliates. Neither PRG nor its affiliates give tax or legal advice.
Published August 27, 2020.