Coronavirus, COVID-19 and your 401k
The latest coronavirus outbreak, now referred to as COVID-19, has caused closed borders and heightened screening at hospitals worldwide.1 Markets worldwide have fallen sharply. There may not be panic in the streets but some people are panicking when they look at their retirement accounts. How should you react? Can you take advantage of the turbulence?
When major events make headlines and cause significant movement in the markets, you should look at your current situation, and your plan to see if you need to make a move.
Are you are a long term investor with diversified investments that include Equities (stocks), Fixed Income (bonds) and Alternatives (assets that do not go up and down along with the stock and bond markets)? If you are then you should be checking each day or a few to see if you have passed your tolerances and need to rebalance. While the markets fall quickly they often recover quickly and you don’t want to miss your chance.
If you are a longterm investor who is over invested in the stock market indices (you let your emotions take over your portfolio) you might not have made the best decisions but don’t panic and make a bad decision worse. If you sell you will not gain back your losses. Markets eventually recover and you will too, as long as you stay the course. You won’t have a chance to gain from the correction but you can eventually recover your losses.
If you are a short term investor, you need the money soon. If you are retiring soon you may not be a short term investor. You may be using this money throughout retirement. You should be talking over your options with a financial advisor. Short term money does not belong in the stock market except for speculation.
It is always worthwhile to review your plan with a financial advisor to be sure it will meet your needs and to keep you on track.
- ScienceMag.org, February 12, 2020