I'm a financial planner, and I'm giving all my clients the same advice for investing while the market is down: Think about how your decision will feel in 2023

Elaine King

Mar 19, 2020, 00:45 IST

I'm a financial planner, and I'm giving all my clients the same advice for investing while the market is down: Think about how your decision will feel in 2023

Courtesy Elaine King

Certified financial planner Elaine King.

I've worked as a certified financial planner for 20 years, and I'm often asked what to buy and how to invest. Today, though, I'm being asked what to do with existing investments.
It's hard to offer universal advice, but I've been telling my clients to picture their lives in 2023 and imagine if the decisions they make today will feel OK three years from now.
You have to feel comfortable with whatever decisions you make or else you'll never stop doubting yourself.
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In my 20-year career as a financial planner, I have often been asked for advice on where to invest and what to buy.

But today, during this global pandemic, things are different. I am being asked not so much what to buy, but what to do with existing investments. And the answer is not so obvious this time.

To have a universal answer that will apply to all is impossible. Imagine your portfolio is cut by 50%, can you stomach that? If the answer is no, it does not matter what I say about long-term investing, Markowitz theory, or historical market turnarounds. If you are not 100% comfortable, you will never stop doubting your decisions.

This is why my one piece of advice is to think about what the consequences of your decisions will be in 2023.

There are some basics you should consider when taking this advice.

Ensure you have enough liquidity

If you're considering investing while the market is down, know that it's more important to have cash on hand.

If you don't have a fully loaded emergency fund - at least six months of expenses, or three months if you split expenses with a significant other - don't invest your extra cash. Hold onto it in case you need it to cover your basic living expenses - such as your mortgage, cell phone, electricity, water, food, and insurance - if you lose work.

Ensure you understand the investment advice you're receiving

In these turbulent times, listening to your financial adviser and blindly taking their advice about buying or selling without understanding why will confuse you more. Always ask for an explanation and some education.

For some, now is a wonderful time to buy stocks. Most of my clients who have financial independence want to take advantage of the drop in prices.

Truly understand your risk tolerance

Imagine how selling a large percentage of your portfolio will affect you three years from now. Or how about if you buy stocks at a discount? How will that feel in three years?

It helps to imagine the decision in three years because, like the COVID-19 virus curve, over time, the volatility of the falling market will flatten. You're asking yourself this question to try to understand what you can tolerate now and what will give you more financial peace in the meantime.

Will you feel better knowing you did not lose anything because you did not sell? Or, perhaps you'll feel best knowing you sold some stock that was at $300 but you got rid of it at $220 before it tanked to $150 and were able to still walk away with gains? You have to think through the possibilities and decide what feels right.

Overall, my advice is to stay the course, but the course you define. Don't let others tell you what to do - truly understand what you can tolerate and the potential consequences of your decisions. Looking at 2023 and the ray of light of a future world that is not in crisis will help you make the decision.

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