The entire world took a big economical hit at the start of 2020. Due to the coronavirus, there were dramatic market drops, the widespread threat of unemployment, and school closures, to name a few. We’ll be guiding you through a few ways that will help your investment portfolio, help provide present and future stability, and help guide you through the coronavirus storm that has overtaken 2020. Don’t worry, these are easy tips to help your investment portfolio survive.
Control Your Expenses
When you’re expecting hard times ahead or are starting to experience financial pressure, the first thing you should do is control your expenses. For example, don’t put more than you can afford on your credit card. Having a well-established emergency fund is a good idea so that you don’t have to pull your money out of your investments, but at times even an emergency fund may not be enough. This is where you start controlling your expenses. This is the first and one of the most important tips to help your investment portfolio survive.
For example, the auto insurance that you’re paying for. It would be a good idea to get in touch with your auto insurance provider to see if you qualify for any discounts. If you have been a good driver in the last few years with no issues on your record, chances are you may qualify for a good discount.
Carefully Utilize Your Emergency Fund
You never know when you will need emergency money. This is why having an emergency fund is so crucial to your financial success and freedom. With the economy consistently reeling due to coronavirus situation, you’re faced with a lot of decisions that could lead you to having a loss of income or expected expenses.
Just because you’re going through a tough time right now doesn’t mean you aren’t prepared. Remember, this is one of the reasons why you prepared yourself and your emergency fund in the first place. Now that you need it, don’t be afraid to use it. While you dip into your emergency fund, make sure you’re keeping track of all of your expenses so that you’re utilizing your emergency fund to the max.
Withdraw Additional Cash Carefully
Aside from your emergency fund, you may have additional cash in different areas, such as stocks or other investments. Your first steps should be to tap into your emergency savings and cutting back on your expenses, but if you need additional cash, you need to know and understand how to prioritize accessing those additional sources of funds. You will first want to stop any current and future contributions so that you can start to use those funds.
For example, if you need to withdraw funds from your investment accounts, you’ll first want to pull from any taxable brokerage account you have because there is no withdrawal penalty from these accounts. You’ll first want to pull from a Rota IRA because those contributions can be withdrawn with no penalty.
A few months ago, Congress passed a bill that allows people affected by the coronavirus to access up to $100,000 from their 401(k)s and traditional IRAs without the normal 10% penalty. This was a huge boost because typically, you can’t withdraw those funds without penalty before age 59 1/2.
Remember that those withdrawals are still subject to income taxes, but the tax bill can be spread over the next three years. You can completely avoid the tax if you return those funds to your respective retirement accounts before the three-year mark.
If you decide to take funds out of your investment accounts, just make sure you proceed with caution. We recommend you consult your financial advisor as well.
Don’t Rebalance Your Investments – Yet
When there are major dips in the market or if you’ve split your portfolio between several stocks, bonds, and other investments, don’t immediately rebalance your portfolio. If your portfolio experiences a loss, you should take hold onto the assets that you have. You don’t need to immediately restructure.
Market lows can be very scary, but remember that these lows also allow you to buy assets are incredibly cheap prices. Not rebalancing your investments is another important tip to help your investment portfolio survive.
Remember that recession and experiencing lows is normal and that you should continue to stay invested even if the market goes down. Coronavirus forced global markets to experience extremely low prices. This allowed investors to take advantage of such low prices and continue to increase their gains as markets continue to gain.
Stay invested because you can always rebalance later.
Always Consult For Financial Help
There is a lot going on in the markets right now because of the recession and coronavirus. If you’re worried about your investments and overall finances, you should consult and seek financial assistance. There are many free or cheap resources available to you, such as robo-advisors on the really low side, to financial advisors that will work with you through professional advice.
If you’re interested in a human advisor, you’re welcome to check out the XY Planning Network. They are a network of fee-only financial advisors that are offering free financial services to those that have experience loss of income due to COVID-19.