Wow. Not many guessed that another virus would knock the stock markets into a fast and volatile correction*. Yet my prediction of an overdue market crash is not the same odds as picking how far it will fall, nor most importantly how fast it will recover. Here are 4 easy financial tips to benefit:
- Refinancing your home is a no-brainer right now. Not taking money out of your equity, but lowering your interest rate or term may be smart math. I recently refinanced my 15 year at 4% to a 15 year at 2.75%.
- The next move after the primary mortgage concludes, is to get a fixed rate home equity line of credit (HELOC). Don’t actually take out debt out on the HELOC, but have it for additional liquidity, and to help you sleep better at night after watching the news.
- If you don’t have one, consider a fiduciary financial advisor to assist and provide an objective view. When a client calls concerned about the stock market, I re-focus them on their financial plan. We use a software called Simplicitree®, which displays a tree with ‘above ground’ assets as those subject to market risk, and ‘below ground’ assets as those having principal protection characteristics. It’s easier for a tree to weather the storm with a solid root system.
- Certain below ground assets are those which may provide liquidity during down market years, allowing above ground assets to recuperate on the other side of a market correction.
- One potential below ground asset is a properly structured Life Insured Retirement Plan (LIRP). With principal protection, it won't lose value due to market declines, it is Triple Tax Protected TM, and most importantly to me, it's accessible. There's no 59 1/2 age requirement to access it which is superior to an IRA, 401k, or Roth during working years.
- Regarding the ‘above ground’ assets which are subject to risk of loss, keep at least a two year long perspective.
- Stocks are ownership in a company, and dividends are your salary. You aren’t losing ownership during a market downturn and the stocks owned aren’t taking money out of your pocket. Not unless you sell them, and remember, for every seller there must be a buyer. That means someone thinks they are worth holding through the storm.
- I often recommend dividend paying stocks for my client’s financial plans, because even in down markets, the dividends still put money in their pocket. If you reinvest the dividends, you are accumulating more shares of the company as prices drop, thus you have more shares working in your favor when the stock market recovers.
- The more the media fans the fearmongering CV propaganda, the more money they make. Consider the peace and well being you’d experience if you simply turned off the news. Personally, I don’t watch mainstream media news shows such as CNN, FOX, or Good Morning America. I find their biases are very strong and it’s easier to research the news from reliable internet sources that are more objective.
One final thought, this virus is an equal opportunity infector. Let's put aside the way the media portrays "us versus them", the partisan views of political parties, and realize we are all Americans and we all are being affected. Beyond that we are all humans worldwide and let's all care for each other to the best of our abilities.