What To Do And Not Do During A Recession

The Do’s and Don’ts.

Do stay the course. If you’re considering pulling money out of the market right now, know that this is the absolute worst time to do so. Buying high and selling low is the biggest mistake individual investors make. It may look bad now, but it will look worse if you sell at the trough and only buy back in when the market is up 10-20%.

Don’t look at your account balance too often. Studies show that people who check their accounts frequently and trade more frequently tend to buy high and sell low compared to people who rebalance once a year. Evidence suggests that people who are open-minded and have neurotic traits are especially vulnerable.

Don’t add more years to your mortgage if you are refinancing. You want to make sure you are never in a situation where you have to sell stocks to pay a mortgage when you or a family member loses a job, hours, or gig in a recession.

Do consider talking with your portfolio manager about allocating a greater share of contributions into stocks versus bonds at this time. With interest rates at historic lows, bonds are unattractive looking forward (as interest rates go up, bond values go down). If you truly want a “safe-haven” for your new contributions, you can use the money market option instead.

Consider adding to existing stocks you own that are still solid companies with strong balance sheets – remember, many of the companies you own in your portfolio are the companies that offer the products and services you use on a daily basis.

Do contact your human resources department and start contributing at the maximum level. The maximum annual 401(k) contribution is $19,500 in 2020, and up to $26,000 for those 50 and older this year. Only 4.6 million taxpayers out of 140 million get the maximum tax advantage for saving in retirement accounts. Your HR department will celebrate your joining the elite club of maxers.

Do practice social distancing.

Do wash your hands.

Do comfort the anxious and the sick.

And lastly, please reach out to Spectre Capital Finance at any time for financial brokerage services.