This crisis will pass, but so will the gift of it to waking-up to live the rest of your lives in gratitude and appreciation for each breath you take.
Then comes the problem of getting back before the markets turn upward, possibly as fast as they went down. This is the age of computer trading and things happen very fast, as we have just experienced. This particular downturn may well be the fastest and most severe to date. It gave few investors a chance to trim down their holdings as the markets were down considerably in just one week’s time.
For those ready to retire or in retirement now, it may be a good time to divide your expenses between essential and discretionary. Essentials must be paid, e.g. food, mortgages, property taxes, insurances, gas and electric, cars, etc. The discretionary side would be anything not essential, such as eating out, gifts, travel, etc. When you calculate what the essential and discretionary costs are, you can divide each number by your investment net-worth, find what the percentage is, and stick to a budget that does not exceed this percentage.
As your portfolio goes down or up and, if the percentage is higher than planned, you may want to cut back on your discretionary spending until the portfolio has recovered again. This will preserve principal and the danger of creating a vicious cycle of depleting your savings when your withdrawal percentage keeps increasing as the portfolio goes down. There are many more strategies to be considered, which will be covered in future articles.
Some examples would be tax-harvesting losses by switching positions on the same day. Thereby, not missing a market upturn if one would occur, but locking in future loss carry-forwards. Also, repositioning portfolios that previously had too much gain to consider a move because of capital gains. There are actually many positive moves one could consider while we are experiencing these depressed markets. Of course, it is imperative that you consult with a tax professional before making these changes.
There is not enough space in this article to fully address the opportunity that presents itself for all of us, but I will give it a try. This shock to our daily lives, in my opinion, is a wake-up call.
It is a time to re-evaluate the reality of the mechanical lives most of us have been guilty of living. We plan and do and do so much every day that most of us miss being in the sacred moments of being alive. Please excuse me for philosophizing, but the moment seems to call for it. I have watched it my whole career.
Professionals on a treadmill, always looking into the future for when things will really be good, trying to turn ”what is” into “what should be”—thereby missing what joy is right in front of them. It is time to come down from our cluttered minds into our hearts and remember the innocence of our childhood. We are more than our money, our professional achievements, our pride. If we look deeper, and this terrible crisis is a perfect opportunity to do so, you will find a peace within you.
John J., John S., and Traudy F. Grande, CFPs, are co-editors of the "Money Matters" column in Ophthalmology Times. They are owners and principals of Grande Financial Services Inc., Oakhurst, NJ (www.grandefs.com). The Grandes advise doctors across the country on a diverse range of investment and financial matters. Readers may submit their financial questions to them at [email protected] or call 800/722-1258.
The views depicted in this material are for information purposes only and should not be considered specific advice or recommendations for any individual. All investing involves risk, including the potential for loss. Past performance is not indicative of future results. No investment strategy can ensure a profit or protect against loss in a declining market.
John J. Grande, John S. Grande, and Traudy Grande are Registered Representatives offering securities through Cetera Advisor Networks LLC, Member FINRA/SIPC. Advisory services offered through Summit Financial Group, Inc., a registered investment adviser. Summit and Cetera are related and are under separate ownership from any other named entity. Registered Branch: 257 Monmouth Rd, Oakhurst, NJ 07755. Phone: 800/722-1258. Website: www.grandefs.com.