Published by Scott Kanai | Founding Partner
“My mama always said, life is like a box of chocolates. You never know what you’re gonna get.”
– Forrest Gump
We are currently in the midst of a storm of uncertainty with the Coronavirus pandemic, selloff in the stock markets around the world, and now a struggling U.S. economy with record unemployment claims. However, we have lived through scenes like today, in the past. The Financial Crisis of 2008-09. The September 11th attack on the World Trade Center. The Internet Bubble bursting at the turn of the century. The Real Estate Crisis. October 1987. The Savings & Loan Crisis. Is it SARS, MERS, Ebola, or Aids?
Fear is rampant. Many investors are reverting to their worst behavioral biases and habits in this environment. The news may have you feeling discouraged but there are decisions that can be made today in order to improve your financial success for the future. Some of these decisions can have a dramatic impact on your financial plan. Now is an excellent opportunity to begin evaluating if your financial blueprint is appropriate for your financial goals. Implement your most effective plan for your financial success.
“The truth is, of course, that what one regards as interruptions are precisely one’s life.” – C.S. Lewis
Some questions come to mind. Is this a passing storm or is it a hurricane? Will the calm be the eye of the hurricane or the parting of the clouds and re-emergence of sunshine? Either way, the storm will eventually pass. The question is what will be left in the wake of this storm? Currently there are two invisible threats: Coronavirus and a weakening economy. How do you manage today and prepare for the future?
During turbulent times like these, it is wise to step back and evaluate what strategies make sense for today and for your future. How should you prepare for the next chapter?
Here are 10 ways to improve and help you organize your finances and investments:
- Stay focused on your overall financial plan: Re-evaluate your timeline for your goals and determine if anything needs to be adjusted.
- Make fact based decisions versus emotional decisions. Behavioral financial psychologists have studied investors and their behavior during good times and tough times. Behavioral biases can lead one to making poor decisions, especially during an anxious time. How do you prevent letting your behavioral biases influence your decision making?
- Evaluate your Investment Process. Assess your documented Investment Process. Is it still appropriate based on the current economic cycle?
- Assess your risk tolerance. Is your risk tolerance appropriate for your goals? What is your “risk budget?”
- Evaluate the investment strategies that you are currently using. How do you use investment strategies and techniques to limit your downside risk?
- Do you need to do any tax planning? Are there tax strategies (i.e. Roth conversions, tax-loss harvesting) that you can benefit from?
- Is it time to put cash to work in the stock market? If so, what is your plan of action? If not, when do you begin? Document your plan of action.
- How do you increase the quality of your portfolio (i.e. stocks, ETFs and bonds)? During times like these, there is an opportunity to increase the quality of your portfolio at reasonable prices. Do you have access to Charter Financial Analysts (CFAs) to help guide your decisions?
- Should you refinance your debt?
- What is the influence of the recently passed SECURE Act on your financial decisions?
Completing these steps will focus your financial plan and investment portfolio on future success. It will also help answer these questions: How do you protect what you have? How do you benefit when the recovery begins? What do you want your assets to accomplish during your lifetime? Where would you like these assets to go after you pass? How can your assets have the most impact for the people and organizations that are important to you? How do you become a better steward of the resources you have been entrusted to oversee? Are you being tax efficient with your assets?
We will endure and make it through the current environment. The biggest unknown may be the open timeline of the coronavirus. I am confident that history will repeat itself. Our country and economy have experienced similar disruptions in the past and have emerged stronger from those events. Will you emerge stronger, the same or worse? Take advantage of the opportunities before you to rise from these troubling times stronger.
It appears that we will emerge from this experience in a changed environment. I believe your goal should be to make the adjustments necessary to have your financial plan and investments well positioned to benefit from the “new” world.
Our goal as financial planners is to try and plan for the unexpected. To be able to have and implement a game plan that is flexible to adapt with the changes that present themselves. If you or someone you know that can benefit from having a conversation about their financial future, please reach out to our team. One of us would be happy to spend some time talking under no obligation to determine if we can help you. You can contact us at email@example.com or by calling (616) 808-3315.
**Converting from a traditional IRA to a Roth IRA is a taxable event