17 Mar 401(k) Participant Letter
Fear and panic were palpable this past week, not only in the financial markets, but also in our personal lives. We received a constant stream of news around schools, churches, sports events and businesses shutting down in response to the COVID-19 pandemic. This truly meets the definition of a “Black Swan” event, both unexpected and its effect incalculable.
Financial markets do not appreciate the rampant uncertainty and accordingly have priced in a significant recession in earnings and overall economic growth. In addition to the unknowns of COVID-19’s impact on our economy, the decision by Saudi Arabia to flood the oil market with supply has put massive pressure on the energy industry.
As emotional as these moments can be, we are encouraging our clients to remained focused on the long-term goals of their investment portfolios and act with a high degree of judiciousness. Clearly, we all have different objectives, timelines and sensitivities when it comes to our investments. However, as we traverse the uncertainty in the coming months, we suggest retirement plan participants consider some of the following financial areas:
- Focus on personal long-term plan. Most of us do not expect to spend down our entire retirement portfolio balance in the next 3-5 years and subsequently have time for a market rebound.
- Evaluate your risk profile. Going through a market correction can change perspective on much risk we are willing to take.
- Rebalance. If you are not in a target date fund or managed risk portfolio, take advantage of the sell-off in equity markets and rebalance to your pre-established equity target.
- Continue to contribute to retirement accounts and take advantage of dollar cost averaging at lower prices.
- Avoid making large strategic asset allocation shifts. Looking back at previous corrections we have noticed that investors often sell at exactly the wrong time (at the bottom) and end up missing the rally when markets recover.
- Speak with a trusted financial advisor or consultant for specific advice. Each of us have different circumstances we need to consider when making any financial decisions. One size does not fit all.
Understandably, many of us still have vivid memories of the financial crash in 2008, which weighs on our collective minds as we attempt to look through to the other side of this crisis and identify appropriate investment opportunities. While this is likely to be a difficult period for the global economy, the comparisons to the financial crisis appear unwarranted. Our banking system is in a strong capital position and markets have functioned orderly despite the extreme volatility.
As always, please do not hesitate to reach out to anyone on your WealthSouth team to discuss your personal situation. We are all tackling the same set of circumstances in real time and subsequently there are no bad questions at this point!
In addition to your WealthSouth advisors, we also have a dedicated call center that is available between 8:30am and 8pm EDT, 800-338-4015. We do not recommend trying to time the market, however, understand participants may need to make requests or changes. As a reminder, if you are making changes in your 401(k), trading does not take place intraday, rather at the end of the day at market close.