Momentum - Business to Business Online Magazine MOMENTUM April 2020 | Page 30
FINANCIAL FOCUS
KRISTI TREVINO
Financial Advisor
Edward Jones
www.edwardjones.com/kristi-trevino
Don’t Let FEARS DRIVE Your
INVESTMENT CHOICES
F
irst, the coronavirus rocked
the financial markets. Then, oil
prices dropped more than 20
percent after a breakdown in
OPEC production discussions.
Not surprisingly, the markets took
another nosedive. Yet, despite these
events, this recent market volatility may
well be attributed more to fear than the
forces that usually drive the markets.
Ultimately, in the investment arena, as
in all walks of life, facts matter. And right
now, if you look beyond the headlines,
the facts that matter to investors may
be far less gloomy than you might have
imagined.
So, here are some things to keep in
mind over the next several weeks:
• This isn’t 2008. If you were an
investor in 2008, you well remember the market
crash that resulted from the bursting of the housing
bubble, which had severe ripple effects throughout
the economy. The situation is different now. While it’s
quite likely that the U.S. economy will take a hit in the
short term, the overall economic fundamentals were
strong before the coronavirus came along and may
indeed prove resilient enough to withstand the recent
shocks. Specifically, the labor market conditions were
the best in decades, housing activity was improving
and interest rates remained low. And even the recent
events may have a bright side: The drop in oil prices
will likely reduce prices at the gas pumps, leading
to more money in the pockets of consumers, which,
in turn, can boost spending, a key driver of our
economy. And the large decline in interest rates will
make home purchases and mortgage refinancing
even more attractive – again, positive moves for the
economy.
• We’ve been here before. From the time the markets
bottomed out in early 2009 until just a few weeks ago,
stock prices climbed about 300 percent. Yet, during
that time, we also saw three separate market drops
of more than 15 percent, similar to what we’re seeing
now. These market corrections always feel unsettling,
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but it’s important to recognize that they are actually a
normal part of the log-term investing process.
So, given these factors, how should you respond to
the current situation? Instead of simply selling your
stocks in an attempt to cut your losses, review your
portfolio to see if it is properly balanced between
stocks, bonds and other investments in a way that
reflects your goals, time horizon and risk tolerance.
Those investors with properly balanced portfolios are
not seeing the same level of decline as those whose
holdings are almost entirely in stocks. And while
diversification can’t guarantee profits or protect against
all losses, it can help reduce the impact of volatility.
Here’s another suggestion: Look for good buying
opportunities, because they are certainly out there. A
well-managed company with a solid business plan that
produces quality products and services is going to be
that same company after the coronavirus and oil price
panics subside – and right now, that company’s stock
shares may literally be “on sale.”
While it’s not easy for you to look at your investment
statements today, remember that you’re investing for
goals that may be decades away. By keeping your eyes
on this distant horizon, so to speak, you’ll be less likely
to over-react to the news of the day – and more likely to
follow a long-term strategy that can work for you.