We truly understand how difficult it can be to adhere to a long-term financial plan when faced with large, daily market fluctuations and a stream of negative news. It is natural to be concerned about the value of your portfolio, apprehensive about what the future will bring and tempting to make changes.
We will get through this. Central banks are slashing interest rates, governments are announcing billions of dollars in aid for individuals and businesses and Portfolio Managers are working tirelessly behind the scenes to move in and out of companies to take advantage of tremendous opportunities and shelter us as best they can.
A downturn in the market can be extremely uncomfortable but it is not the time for hasty actions. The key is to look beyond the short term and envision the recovery. We may need to look to other planning strategies to help us to remain vigilant and stay the course. Here are some tips that we hope may help you to navigate through this period of volatility.
- Above all else, your health is most important, physically and mentally. Please be sure to take all necessary precautions to protect yourself and your family from the COVID-19 virus.
- If you are at home, take time to strengthen relationships, rejuvenate and perhaps try some inventive online studies or new hobbies.
- It is important to resist the urge to sell assets because we are fearful of continued market declines. We have every confidence that the markets will recover ~ It is just a matter of time.
- Your investment portfolio has been designed with a diversified and balanced approach and we have taken measures to account for shorter term needs by positioning a portion of your money in the more stable Bond asset category.
Reduce expenses and spending wherever possible
- It is important during economic times like this to reign in our spending and look for ways to cut down on expenses, stretch the groceries and reevaluate your needs.
- Some of this may come naturally as you will not be traveling to work or going out for entertainment but be cautious not to start expensive projects, since you may be at home with time on your hands.
Reduce Income from Investments
- If you really do not need the money we are paying out from your investments, please consider reducing or stopping for a while. This will help to preserve your assets and allow you to fully take advantage of the market recovery when it happens.
- The government has announced a relief measure that reduces the minimum amount that must be withdrawn from your RRIF by 25% for the remainder of the year.
Cut back on monthly contributions
- Although this is a good time to invest and making systematic contributions is beneficial, it may be causing too much pressure on your cash flow at this time if you are off work.
Take advantage of Government Aid
- There are a lot of programs and aid packages the government is announcing but we have to give them time to put the necessary procedures in place.
- Be sure to thoroughly research the ramifications of taking advantage of some of these relief efforts before applying. As an example, Banks may be offering 6 months of deferral for your mortgage payment - be sure to ask for details like what happens to the interest, will this affect my credit rating etc.
Income Tax Return
- If you are expecting a refund, file online ASAP and get those dollars into your hands to help you through this time if cash flow is tight.
- If you have to pay, take advantage of the governments announcement to defer your filing until June 1st and the payment extension to August 31st. You will not be charged a penalty or have any negative consequences. This could ease some of your cash flow pressure.
Make periodic or lump sum contributions
- "Be fearful when others are greedy, and be greedy only when others are fearful." Now is an incredible opportunity to buy into a beaten down market. If you have some savings that are not needed for the next few years, investing into the market at ultra low values is a smart course of action.
- If you have access to low interest debt, have stable cash flow and time, you may want to consider borrowing to invest.
Make use of Low Mortgage/Debt rates
- Borrowing rates are at record low levels. If you require financial assistance, you may wish to consider borrowing a small sum from your secured line of credit to get you through and when markets recover, we can design a payback plan.
- If your mortgage is coming up for renewal, you may wish to look into borrowing a little extra at a very affordable rate.
When it comes to your investment portfolio, our advice is to continue to stick to your long term plan, which has been carefully constructed to reflect your personal objectives and investment time horizon. If you have concerns about your portfolio, please reach out to us. We are here to help in any way we can.
We wish you and your family good health and peace during this time.
Karen, Richard, Janet and Sheila