In today’s unpredictable economy, staying on top of your finances can be challenging. And deciding to invest when the market is going up and down like an elevator, with little warning, presents challenges for even the most experienced investor.
Still, financial experts say this could be an ideal time to invest. If you have extra money available, the first step is to determine your personal financial goals and your timeline for needing that money. Greg Watkins, with Stock Yards Bank, said every investor should make their decisions based on their own goals and needs.
Watkins
While Stock Yards typically works with clients who have at least $500,000 in investable assets, Watkins said that despite market volatility, now is an ideal time to consider investing at any level.
“Volatility is a good thing. These times of volatility are probably some of the greatest opportunities to put money to work for you,” he said. “When people are panicking and all you see on the news is that the market’s down... Those are times when you should be adding to your long-term investments and for most people that is usually an IRA or a 401k.”
The thing investors shouldn’t do, he said, is panic and pull money out of the market.
“The thing you don’t want to do when the market is down is to quit investing or quit putting money in your 401k or taking loans out,” she said. “In general, it’s not time to panic and you should embrace those times of opportunity.”
In times of economic uncertainty, investing can feel daunting, but it doesn’t have to mean taking big risks. Financial experts say that by aligning your strategy with your personal risk tolerance and time horizon, it’s possible to grow your money while limiting exposure. Whether you’re decades from retirement or drawing closer to it, today’s market still holds opportunities for smart, measured moves that can pay off in the long run.
“When you’re looking at someone’s net worth... everything is relative to when the dollars that you’re going to invest are needed,” Watkins said. “If you’re going to need those dollars in two years then you’ll probably want to put those dollars into some sort of a bond investment. If you’re going to need those dollars in 30 years, then you can afford to take a risk because you have a longer time horizon. However, if you have outstanding debt that is at a high-interest rate, then it’s probably incumbent on you to pay your debts down first.”
For investors nearing retirement age, there are also opportunities to help safeguard their assets and make their money work for them, even amid market volatility.
“If I’m 55 or 60 years old, and I’m going to retire at 65, I’m not going to need all of my retirement dollars on the day that I retire,” he said. “I’m going to take money out at a measured rate over the next 35 years. So, I still need to have equity in my investments. If you have your asset allocation between stocks and bonds allocated appropriately for your bonds to take care of your short-term cash needs, these short-term swings in the market are totally irrelevant to the disruption of your short-term cash needs.”
Watkins emphasized that younger investors have more time to take more risks with their money.
“If you’re someone who’s in their 20s, there are opportunities to compound those dollars over a long period of time,” he said.
Watkins also stressed the importance of tailoring investments to individual needs.
“A 60/40 portfolio may work for some but it may not work for others, because different people will have drastically different financial backgrounds as well as different financial needs, incomes and desires for how they want their money to be invested,” he said. “All of that has to be considered.”
He cautioned that there is no guarantee that any investments will perform better than others and that all investing includes risks, including fluctuating prices and loss of principal. Additionally, even bonds are subject to market and interest rate risks if they are sold prior to maturity and values for bonds will decline as interest rates rise.
Andrew Kung
Brien
Overall, Zach Brien, a wealth management advisor with Fifth Third Bank, said what extra money means to the investor matters as well.
“It depends on what the money means to the individual,” Brien said. “If the funds are needed to bolster emergency savings or will be used soon for a specific purpose, an interest-bearing account or CD is a safe way to protect the funds and still get some yield. If the funds are intended as a long-term investment, a well-diversified portfolio of strong companies and high-quality investments is best, particularly in times of high market volatility, as we have seen recently.”
Schachleiter
For some investors, keeping it simple may be the answer, Michael Schachleiter, senior investment advisor with Fifth Third Bank said.
“My answer is that it depends,” he said. “If a person already has a defined long-term investment plan, invest the excess cash in line with that plan. If a person is a new investor, they should invest in index-tracking ETFs (exchange-traded funds). This will keep it simple and cheap but provide diversified exposure.”