A Bear? Where? Remain Calm.

There is so much going on in the markets right now. Is it a Bull Market? Is it a Bear Market? Does the recovery seem to be moving at a snail’s pace? Are people following others blindly like lemmings? Right now, who knows!

I’ve had a lot of questions lately about the Bear Market and what you need to do to protect yourself.

Thinking about the “bear” market reminded me of a funny story about a bear (ok, not funny at the time, but looking back it is) and how we literally needed to protect ourselves from a bear once.

Years ago, Khy and I went camping in George Washington National Forest. We hiked into a remote area and set up camp along a ridge that overlooked the valley below. After a day of rock climbing we built a small campfire and cooked a delicious dinner. After dinner we cleaned up, stored our food and hit the hay in our tent. Almost immediately, we fell fast sleep. 

Later that night Khy awoke with a jolt as a HUGE nose pushed in the top of the tent. “Wake up it’s a bear”, Khy screamed. “Keep quiet or it will get us”. I rolled over slowly listening to the loud breathing of the beast. 

My response to Khy, “I think it knows we are here…” I spoke to the bear in a calm voice letting it know that all the food was way up in the tree. Not that it understood, but after a while it slowly rambled away. We were not to get eaten that night.

Why is this significant today? Whether we are talking about protecting ourselves from a large animal, or protecting our nest egg from download market trends believe it or not, my advice for both is the same—stay calm!

The Bear Market and financial downturn have most people on edge and wondering what will happen next. You should have measures in place—a plan—to help you fend off any downward trends. A solid plan will help you deal with the short-term bear market as well as prepare to catch the upturn of the next bull market.

Here are 7 things you should do now:

1. Check Your Spending—Set up (and stick to) a budget. Minimize non-essential spending and focus on essential expenses. If you are looking for some budget tools, checkout eMoney.
2. Re-Evaluate your Contingency Funds—You need to have 3-6 months of essential expenses in a safe account. This is a pool for expenses not income. Make sure to have funds that are liquid that you can access easily.
3. Set up Second Line Emergency Funds—The CARES Act provisions allow you to access retirement funds if you have suffered a hardship due to COVID-19. Where can you go for additional funds? Your 401(k) may be an option but think carefully about accessing funds from here. Preferable options would include: Cash Value Life Insurance, ROTH, or perhaps even a HELOC. Think about both the short- and long-term impacts when evaluating all your options.
4. Increase Your Savings—This may seem contrary to what is happening, but if you can increase your savings rate while lowering your spending, you are that much ahead when we fully recover. Pick a goal either an amount or percentage and strive diligently to meet it.
5. Review Your Risk Tolerance—Sit down and really look at what how you feel about risk in your financial assets. One size does not fit all here. Your short-term and long-term goals may need adjustment to fit market conditions and if you have changed your position on risk. Being all in the market may not be where you are today or where you need to be.
6. Review Your Asset Allocation—Most people have a “set it and forget it” approach to their portfolio. This may be a good model if you have set them up properly to start. If you didn’t, or you do not know how they are setup, now is a good time to review and reposition accordingly. A financial advisor can help you personalize your asset allocation and your portfolio to meet your specific needs.
7. Look for Tax Savings—Review where you may have tax savings opportunities. If your portfolio has taken a hit from the down market and/or you find yourself in a lower tax bracket it might be a good time to convert some of your funds into a ROTH IRA. Doing a Roth conversion when the market is low could be advantageous for you in the future.

A lot of little things can make all the difference. If you do these 7 things now, you’ll be in better shape. The bottom line is, you need to plan.

Feel free to reach out with any questions and don’t forget to take advantage of your free subscription to eMoney. (see below)

We are all in this together.

 Sincerely,  

Mark and Khy Sweeney

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