The Pandemic Effect on Your Portfolio Choices
In the real estate world the old adage for success is “location, location, location,” the mantra in the investment world is “diversify, diversify, diversify!”
Because events are changing daily, it’s too soon to predict how the Coronavirus pandemic will change financial decision-making in the future, but it seems likely to serve as a reminder of the importance of savings, having an emergency fund, minimizing debt, and keeping your portfolio diversified as well as your financial house in order to lessen stress in turbulent times.
It is more important than ever to keep focused on your financial goals. Many who are experiencing financial pain most profoundly during the pandemic like parents on job leave with young children, may become overly conservative in their investment allocation in the future, which might put their long-term financial security at risk. Most middle-age investors who have survived similar market scenarios have not seen anything on the scale of the pandemic. They may become overly cautious and under-allocate to risk assets in the long-term, also putting their financial security at risk.
There is no question loss-aversion bias plays a critical role in investor psychology, it can be paralyzing for some when things start to go awry in the market. For others, loss-aversion during a big decline translates into an opposite response, a mentality of double or nothing with a tendency to invest in risky assets as a gamble. Both put long-term financial security in jeopardy.
Fortunately, there are other variables at play besides risk- and loss-aversion. Personality comes into play as well as physical and emotional health (See our prior article HERE). These are troublesome times already, economic and health concerns are now compounded with racial and political complexities hard to put in perspective. In the context of lifestyle changes, lack of childcare, working from home, loss of sleep, perhaps excessive caffeine or alcohol intake, and lack of exercise due to social distancing, you have the basis for an oversized stress attack. That is why it is crucial to understand what we can control and be realistic as well as proactive in our actions.
What the effects of the Coronavirus crisis may be on our financial psyche remain elusive for now, but it may permanently change the way we save, spend, and invest — no matter what our generation.
Reach Out To Us: The economic news surrounding the Coronavirus is changing constantly, and TFGFA is ready to provide insights about your best options in these fluctuating financial markets. Investors have access to more information than ever before — but it can be overwhelming to figure out what’s important and what’s right for YOU. We have resources that can help investors understand what’s happening, and what their best choices are for their circumstances. The market has endured epidemics, terrorist attacks, recessions, hurricanes, etc. A solid financial plan will weather the storm if well constructed and well diversified, as well as tax efficient. Feel free to contact me, Cory Lyon, directly at 561-209-1120, for a complimentary portfolio review and analysis. At TFG Financial, our goal is to assist you in making informed decisions. We believe in personalized asset management, and I act as a fiduciary for all my clients.
TFG Financial Advisors, LLC is a registered investment advisor. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any securities, and past performance is not indicative of future results. Investments involve risk and are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed here.