Investments in a Volatile Market

It sure has been a ride since March 2020. Personally. Professionally. Financially.

The market has been especially on a roller coaster the last few weeks and I’m fielding calls about investing pensions: should retirees leave the stock market and is it a bad time to invest? I’ve been through multiple down markets and too many volatile swings to count. I still come back to my tried and true investing philosophy.

1) Leave 9-12 months of expenses in a money market account.

I’m still a fan of the high-yield savings of Marcus or American Express Savings. They are paying higher than your local bank and are FDIC insured. More importantly - it is harder to get to and spend.

2) Getting a lump sum now?

The market seems at the height but we don’t definitively know that! Invest 10% now and spread the remainder on dollar cost average investing over the next 12-18 months.

3) Invest Every Month.

If you have your investments on auto - you would automatically be taking advantage of a down market. More importantly, my clients that save automatically, have more money saved in the long run. I’m talking about my freelancers, middle-class ones that can NOW retire because of this.

4) Balanced Mutual Funds.

I’m a huge fan! They are also called allocation funds. They hold steady in down markets and still provide substantial returns in up markets. Every mutual fund company from Vanguard and Fidelity offer them. You can choose different allocations: stock 70%/ bond 30% or 50/50 or 30/70.

5) Revisit your asset allocation in your retirement account.

Maybe it’s a 401k or 403b or SEP IRA. You should do this once a year but it’ll protect you in long run against these volatile markets.

6) Do you need your money in the next 3 years?

If so, I probably won’t invest most of it. The market will have a correction and could take a few years to come back. If you need your money in that time period (i.e. downpayment, retirement, renovation, kids college) you don’t want to lose any of it.