INDIANAPOLIS, Ind. – It is the longest-running bull market that started in 2009, but the recent coronavirus has caused the stock market to plunge, and when that happens, most people’s investments are affected. That holds true for people around Indiana because most investments are tied to the stock market. The markets don’t like uncertainty, so we have some tips to help investors protect their money.
“We have watched our life savings go up significantly and then return down, so in the last year we really just started to take the time to investigate what should we be doing because I’m tired of the roller coaster, I’ll just be honest with you,” said Christian Litscher.
Dealing with the ongoing roller coast ride brought them to a local advisor who told FOX59 to not panic, but don’t just do nothing. For most clients, he believes in a three-bucket investing system that might work for you.
“Bucket number one is a zero to one percent return. It’s completely insured, and it’s there liquid for emergencies. Bucket number 2 is a 5% to 8% return, it’s completely insured, it’s liquid in emergencies, but it’s there to provide income. Then there’s the last bucket where 99% of the people that come into our office have 100% of their money. Bucket number 3 is money that can go up or down. It’s completely volatile and your’re paying a management fee for it,” said Casey Marx, Crown Haven Wealth Advisors.
One risk guideline is the Rule of 100. Take your age and subtract it from 100. That’s how much of your portfolio should be exposed to riskier investments like stocks. That means having more risk when younger and less as you near retirement. For example, if you’re 30, 70% of your portfolio can be exposed to risk, and the other 30% should be in lower-risk investments. But once you are 60, only have 40% of your portfolio should contain riskier investments. Experts say, diversifying your exposure to any one asset class helps reduce your risk and can add a layer of protection to your portfolio.
“I’ve found planning and determining your investment strategy is not something you should do at 60. This is something you should do at 30. The earlier the better,” said Litscher.
A recent study found 45% of baby boomers have nothing saved for retirement. There are ways for people to grow their assets without putting their life savings on the line, and we are passionate about helping create secure and holistic plans for our clients. Emotions are a common driver of investors’ decisions. It scares people when the market drops, and people can also get greedy when the market is at a high. This leads us to sell when stock prices are low and buy when prices are high, which is the opposite of what we should be doing. Investors who reacted out of fear during the Great Recession took longer to recover their losses. Those who stuck with a long-term plan and continued to save are in a lot better shape today. There are also tools that are free on the web that can help with your investment strategy.
“We’ve got a retirement calculator on our website, Crown Haven.com that can be very useful, but like any on-line calculator, it can’t tell you what to do, just how much you’ll need to invest. Having said that, it’s not the amount of money that you eventually end up with in your account, it’s the amount of income that you can generate from it,” said Marx.
So don’t react to a stock market drop and sell and don’t bury your money in the backyard. Diversification is key, and it’s working for the Litscher family.
“There’s a way to do this and protect yourself. And at this point, we’d rather make sure that our life savings, our investment, our time was protected,” said Litscher.
Finally, control what you can. We can plan and prepare for turbulence on Wall Street, but we can’t control it. However, we can control other factors, like how much debt we take on and what we put into our retirement savings.