Finance
Ask An Advisor About: Investing during the COVID-19 Market downturn
Belle Osvath, CFP®, AIF®
We asked the advisors at local firm, VLP Financial Advisors on what investment advice that have or strategies they recommend during the recent market downturn. Don’t try to Time the Market Your instincts might prompt you to pull your money out of the market when values fall and then re-enter when markets are recovering, attempting to avoid losses. This strategy is called market timing, and while it may seem like a simple way to protect your assets it can potentially result in long-term negative effects on your portfolio.
presented us with historic market swings. During March we saw quite a few 4% swings of the DOW in a single day (both positive and negative.) You may be able to get lucky and avoid some of the down days, but missing even a few days of positive performance can set your portfolio back and limit the regular compounding effect of positive market performance. The truth is that it’s incredibly difficult to successfully time the market consistently over the long run, and I recommend that my clients avoid any attempt to do so.
The problem lies with the timing of when to get out of the market and when to get back in. Markets fluctuate from day to day, which makes it very difficult to capture positive performance based on timing. How do you know when the market has reached its bottom and is on its way back up? The truth is you don’t. No one does. You can use your best guess based on a variety of market or economic indicators, but at the end of the day, you are still just guessing.
Leaving investments alone in a period of bad performance is hard because it goes against what we’re taught, even though it is the right move. I strongly believe that if your financial plans haven’t changed, your investment strategy shouldn’t either. Goals, not market performance, should be driving investment choices. If you’re the kind of person who has to take some action, now could be a smart time to buy if you’re able.
Belle Osvath, CFP®, AIF®
The most recent period of market volatility due to COVID -19 has
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