CLACKAMAS COUNTY, Ore. — Coronavirus panic lead to the worst day for the DOW since 1987. Trading was halted twice Thursday morning. But, the Federal Reserve pulled the market back from the edge when it pledged to inject money into the banking system.
For a lot of people, the big concern right now is that 401k balance, especially if you are close to retirement. However, financial experts think the economic consequences of COVID-19 are unlikely to be long term. So selling now is not recommended.
KGW sat down with Ashley Micciche, the CEO of True North Retirement Advisors in Clackamas to get some answers:
Q: What does this mean for investors?
A: “First of all, the stock market is already pricing in this guess, that yes, we probably will go into recession, things are going to get worse, so the fact that it’s already been reacting so strongly already, is I think cause for some hope because I think the market’s already down significantly, it’s down about 25% for the year currently, it may still continue to go down, but I think a lot of the fear and panic is already baked into the stock market already.”
Q: What should I do as an investor right now?
A: “You know, the best thing you can do, especially, if you’re young and especially if you have cash on the sidelines, the absolute best thing you can do is just stay the course and even buy, it’s an incredible buying opportunity if you’re fortunate enough or in a position where you have cash. The worst thing that anyone could do regardless of how old they are and how close they are to retirement is to sell and get out now. You missed the boat, I mean three weeks ago if you had a crystal ball and you could see, even then, getting in and out of the market and trying to time the market, no one can do that successfully because you have to be right twice. So, you have to get out of the right time, you have to get back in at the right time and almost no one can do that. Hopefully, whether it’s in your 401K or in your investment portfolio that you don’t, if you’re close to retirement, you don’t’ have everything in the stock market and so you can rest assured that you are somewhat insulated from the downturn because you’re 50 or 60 or 70-years-old, maybe only half of your investments in your 401K and your retirement accounts are in the stock market.”
Q: What should I do with my 401K?
A: “Yeah, stay the course, it’s tempting to sell and to hide, to put a halt, you know, just cut my losses and say I’m going to get out and then I’m going to get back in when I feel better, but the problem is, is when you start feeling better, the economy and the stock market is already likely to have recovered significantly and interestingly enough, if you miss just the ten best days in the stock market over the last 40 years your returns were cut in half.”
Q: At what point would you recommend selling?
A: “I don’t. As long as, because at the underlying investment of what you own, as long as it’s quality, there’s no reason to sell. The U.S. is going to recover from this, the economy is going to recover from this, it may take some time, but it will happen. This isn’t the end of the world and so as long as investors realize that and don’t abandoned their long term strategy, that’s the worse thing you can do is, your investment portfolio for retirement is designed to be a long term investment strategy for your retirement and if you abandon that now, you can’t know when to get back in.”
Q: So, you said it is a good time to buy, but what should you buy?
A: “I just had that conversation with a client, so there’s a lot of great stocks right now that are down big if you buy individual stocks, but pretty much everything across the board, unless you’re investing in treasuries right now or gold, everybody’s taking a bath, so adding to your portfolio whether it’s an existing investment that you have, as long as you’re paying attention to quality and making sure that whatever you own is a good business or a good investment, now’s a great time to buy because everything’s on sale.”
Q: What would you recommend looking for?
A: “There are individual stocks that have been really beaten up. I just talked to a client today who we bought a stock, the last time it was at this price was in the summer of 2018 and it’s a great company, so look for companies that are bargains, but have good future growth prospects, good businesses, they have a competitive advantage, barriers to entry are high in their industry, so it’s not easy for another competitor to just come up and wipe them out, those are perennial things to look for in a good business and they exist right now because things are at a bargain.”