What are you doing to protect your portfolio from the coronavirus?
Stocks have been reeling lately due to the fears of a widespread pandemic from the Coronavirus or COVID-19. Volatility has increased in the Stock Market because of fears that the virus has spread wider than what was initially reported. The problem at heart here is that many investors today are too heavily allocated to equities. We have seen an incredible bull market over the last decade. Sometimes this means that it makes it easy to forget about the risk of loss. In addition, during a bull market the equity slice tends to grow faster than the more conservative part of an investor’s portfolio and then it becomes a larger percentage of an investor’s portfolio. This creates additional risk that may have not been planned for originally. When we see an event like the coronavirus, it can be a gut check to re-evaluate your portfolio and see if you are taking the appropriate amount of risk for you.
Economic Effects Of Coronavirus
The recent fears have been spread further because it is causing entire cities to quarantine many citizens. Looking at this from a business perspective, that means that stores aren’t open or selling anything. People aren’t working and making money. Depending on how long this lasts, that could have a material impact on GDP for a country. For Starbucks, they only recently re-opened stores in China. That means they had around 4,000 stores making nothing. There most certainly will be an affect on companies’ bottom line when you have to close stores or amusement parks. This makes for a good opportunity to review what your portfolio is invested in and to check how much international exposure you may have.
Check In With Your Advisor
There is no mistaking events like this will occur in the market, but making sure you are set up for when these events do occur is vital. Some questions you should be asking your financial advisor if you are uncomfortable with the current market:
1) Are you taking too much risk in stocks currently?
2) Will my income be affected by this drop in the market?
3) Am I still on track for my long term goals?
4) Are my investments appropriate for my age?
5) How will we react if the market continues to fall?
You should be proactively having a plan in place for whatever curve-ball the market throws you. If you would like to get a second opinion on your plan and speak with an advisor feel free to give us a call (360)828-1469 or send us a request form