By Daniel Korleski, MBA
After enjoying an 11-year bull market, things sure have changed. Even multiple months after its introduction, COVID-19 is still wreaking havoc across the globe. Unemployment is high, the markets are volatile, and, understandably, many people are struggling financially or worried about their money—among other things.
There is so much out of your control right now, but you are not completely powerless. There are ways you can be proactive about your finances and make the most of this time. Here are four strategies to help sustain your wealth during today’s financial crisis.
KEEP INVESTING
It may seem counterintuitive, but one of the best ways to build wealth during a financial crisis is to keep investing. If you have at least a 10-year time horizon, the best time to invest is while the stock market is down. That is because when stock prices are low, you can get more for your money and there is more upside potential.
Investing is not about timing the market, it is about time in the market. Over the long run, stocks grow your wealth. It is just hard to see when you are looking at it day to day. If we look back at the 2008 financial crisis, we see that stocks fell by more than 50%. (1) But the market began to bounce back in 2009. Those who persevered saw their portfolios regain their original value in two years and reach all-time highs in 2019.
We’ve had 12 bear markets since World War II. (2) And guess what? We recovered from every single one of them. We can’t say when a stock has hit its high or low. But we do know that, while past performance cannot guarantee future results, if you’re patient and keep on investing, the market should recover again and you will not have missed it.
REVISIT YOUR PLANNING PROJECTIONS WITH YOUR ADVISOR
It can be scary to see the stock market drop when you’re at a time in life where you may need to access your investments. It’s easy to get nervous that the decline in markets and shaky economy may trigger changes to your lifetime outlook. In reality, we find that the outlook for most clients does not change as much as they expect. Reviewing projections with an advisor can help reduce the stress that you feel today, and in some cases, may even lead to slight changes to spending that will improve your outlook.
LOWER YOUR COSTS
A financial crisis usually offers good investment opportunities for those in a position to take advantage of them. One way to grow or protect your wealth right now is to lower your costs. Every dollar saved is a dollar that can remain invested.
Lowering your costs can happen on both the practical level and the big-picture level. For example, you likely won’t be able to do much traveling this year, even if you want to, which means you can use your lower travel budget to save more. Also, consider reviewing your insurance coverage to see if you have duplicate or unnecessary coverage. Insurance needs change regularly and you could save money on premiums by updating your policies. Another way to lower costs is by refinancing debt. Interest rates are at record lows right now, and dropping even a half percentage point on a long-term loan can add up to significant savings.
Seek advice regarding how to maximize tax deductions and take advantage of other government programs, such as the coronavirus stimulus bill. Finally, ask for discounts. Many prices are negotiable and discounts are available if you are bold enough to ask for them. Talk to your credit card companies about lowering interest rates or contact your internet or cable TV provider. It’s amazing how much money you can save if you’re not too shy to ask.
AVOID COSTLY MISTAKES
During difficult economic times, it usually makes sense to stay adhered to your strategy. We recognize that this is easier said than done. As an investor, it can be challenging to stay focused on a disciplined investment strategy when headlines are scary and markets move dramatically in response to the daily news. This is not helped by those who compete for your attention and benefit by stoking fear. Don’t let the news and rhetoric be distractions to your financial resolve.
To help address uncertainty and downturns, adhere to three key principles:
- Employ a disciplined investment strategy that is integrated with other elements of your (up-to-date) financial plan to help manage the impact of short-term volatility and taxation.
- Manage investment risk through widely accepted practices, such as diversification, rebalancing, and investing according to when you need the money (not by acting on your gut instincts).
- Accept market downturns and corrections as part of investing. Have a distribution plan that doesn’t involve selling equities at the bottom, and allows equities to recover over time.
HOW WE CAN HELP
It’s safe to say that just about everyone is experiencing stress of one kind or another during the 2020 financial crisis. You have enough to worry about, so consider connecting with a trusted financial advisor who can help you create a step-by-step plan for protecting and growing your wealth today, no matter the circumstances.
Cobalt Private Wealth is a financial planning and investment management firm that’s dedicated to helping you weather any financial storm that comes your way. Whether you need help managing your portfolio, creating a financial plan, or minimizing taxes, we’re here to help. Get started by contacting us at danielkorleski@cobaltprivatewealth.com or 719-332-3863 to schedule an introductory meeting.
ABOUT DAN
Daniel Korleski is the President & CEO for Cobalt Private Wealth, where he helps his clients grow, manage, and protect their wealth so they can work toward a stronger financial future. With over 30 years of experience in the financial services industry, Dan has served as the managing director for Investment Trust Company, chief investment officer for the Wealth Management Group at American National Bank in Denver, and regional investment manager for the Greater Colorado Region of the Private Bank at Wells Fargo, where he oversaw the management of over $2 billion. In 2008, he was appointed by the mayor of Colorado Springs to the City’s Investment Advisory Committee. Dan holds an MBA in investment management from Midwestern State University in Wichita Falls, Texas, a Bachelor of Science in Finance from Florida State University, and is a member of both the CFA Society Colorado and The Financial Planning Association.
Dan loves to give of his time to his community and has served as Chair of the Board of Trustees of Pikes Peak Hospice Foundation, the Board of Directors of Catholic Charities of Central Colorado, President of the Broadmoor Rotary Club and Vice President of the Board for the Pikes Peak Chapter of Trout Unlimited. Dan was born and raised in Spain and is fluent in Spanish. When he’s not working, you can find him traveling around the world with his wife of 22 years, Montse, fly fishing, golfing, and hiking with his golden retriever, Curro. To learn more about Dan, connect with him on LinkedIn.
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(1) https://www.thebalance.com/stock-market-crash-of-2008-3305535
