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Managing Your Investments During These Turbulent Times

How to evaluate your investment strategy.

3/17/2020 | Harvey Mackler, Banking on Harvey

With the political campaigns and coronavirus, to say the least the future is quite unpredictable.   (If any of you know differently, please share your wisdom with the rest of us!)

Stock markets and interest rates reflect the investment community’s future expectation, not current facts.  And when that expectation is uncertain, we can experience wild fluctuations.

The following are an accumulation of comments from very successful money managers.  I am sharing their expertise with you.

From a political standpoint, VP Biden represents a more calming change than that of Senator Sanders, but nonetheless a change.  And of course, if President Trump is re-elected, it most likely be business as usual (defined by his first three plus years in office).

Now throw in the coronavirus.  I don’t want to minimize the loss of lives, which is tragic, but I am limiting my comments to the financial markets.  This creates a huge amount of uncertainty. The bottom line, what should you do with your investments?

(As I write this column, Saudi Arabia has contributed to a price war with oil.  This will further put downward pressure on daily stock values in spite of a strong US economy.)

The first thing you need to do is assess the reasons for your (hopefully) accumulation of wealth.  Is it a rainy day emergency fund? Are you putting together your retirement package? Or are you planning a career change?  Or estate planning? Or some other reason?

Next consider your age.  Can you afford to lose capital in the short term?  Do you have the time to earn it back? Or do you need some or all of it in the near term?

For example, if this is your retirement fund and you are in your 40’s or early 50’s, you can afford risk in exchange for the long term reward.  You don’t need the money now, and you have the earning capacity to replace any current losses in the long term.

On the other hand, if you are nearing retirement age and need these funds, you should be in a much safer portfolio allocation.  You do not have enough time in front of you to earn it back.

This general market pressure is why the long term interest rates have dropped (10 year Treasuries, sort of a fleeing to safety), which is impacting mortgage rates.  You might want to consider refinancing. Your house may be your largest investment.

Ignore the daily gyrations in the stock market unless you find it necessary to change your allocations.  You are not a day trader.

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