06 Jun What To Do With Your Money In the COVID-19 Economy
Last year all we thought we had to face going into 2020 was the brewing trade war between China and America. Little did we know that by June we were going to be in a countrywide state of panic. COVID-19, businesses closed for months, and now protests and marches not only stretch across every state of the union but also overseas over the ongoing conversation of police brutality in our home country. With all these circumstances weighing down on us, handling our finances becomes even more difficult. Many Americans are out of work, many are waiting for their job to come back, and others are blessed enough to simply trade their office for a couch and their slacks for sweats. No matter how you have been affected, you have been affected, and this means you have had to change some things around. This includes your finances. Whether you need to make ends meet or try to make the best of your investments during these volatile times, the endowment model of investing can be used to secure your finances for a rainy day or take advantage of a disvalued market.
The first step you need to do in the endowment strategy whether we are talking the economy of 2020 or 2019 is to draw your map. The Ortiz Method/Endowment Model is not about making a quick buck, it is about accomplishing your specific financial goals with the tools you have at your disposal under your specific circumstances. In other words, you cannot get where you’re going if you do not even know where you are. So, step 1 is to take inventory. This is especially true of those who’s occupation has been put on pause or lost completely due to the ‘Safer at Home’ order. So, if you have never looked at the money coming in and going out, now is the time to do so. The next step is looking at your assets. If you own a house, have any employer benefit plans such as 401(k)s or any other investment accounts, even a safe filled with gold or buried in your backyard counts, just make sure you know what you have to work with when it comes to capital at your disposal. Make sure you do not have any large and outstanding debts that can come back to bite your financial plans in the rear once you’re already off to the races. If you do, at least get them on good terms with a steady payment going. Another important variable in this equation is your personal risk tolerance. If security is more important for your goals than growth, that is going to affect your decisions as far as which investment vehicles you will be placing your money and your faith in. The last thing that you want to take inventory of before you take action is time. Time is one of the most important factors if not the most important factor in the Ortiz Method/Endowment Model when it comes to deciding not just when, but how you are going to reach your goals. If you are nearing retirement and lost your job, you are going to be distributing your assets quite differently than the father of four who’s well-known catering business has lost its pulse. And both of these households are going to allocate their assets differently than the online accountant whose business is virtually untouched (get it).
Once you know where you are, you now must figure out where you want to go. And by this, I mean what are your financial goals and how you are going to reach them. Some people are trying to stay afloat until they return to work, others are retired, and others are trying to figure out where to put their money with the stock market in such a volatile state. This is where the Ortiz Method/Endowment model finds its strength, on the backs of Alternative investments. The key component that alternative investments bring into a portfolio is stability. Alternatives find their home in industries that are not directly correlated with the stock market. Industries such as precious metals, real estate, and energy (oil, gas, etc.), are not directly affected when the market sees an aggressive shift such as when the governments of the world’s quarantine strategies effectively shut down entire industries. Do not get me wrong, money can still be wisely allocated to the stock market at this time, but you definitely need to dedicate a large piece of your pie to alternatives. So, what is the ratio then? Well, this depends on your assets, your risk tolerance, and your time frame. Once you know these factors, you can adjust the growth, liquidity, and security of the portfolio accordingly.
So, if you are someone who has assets to invest but is looking to use them to get by until you’re back to work here is a suggestion; fixed-income strategy, such as a short-term interval fund that pays steady income. However, if you are a small-business owner your finances are a little trickier. You must figure out how to pay employees, yourself, and keep up with your lease and other bills. If you need help to make all these ends meet, then it would be wise to reach out for the low-interest government loans. Especially because they are forgivable if used for certain business expenses, including payroll up to a certain amount. Take this time to save every penny you can and wait for the worst to be over, you will know where the ship needs patching up after the storm has passed.
If you are one of the individuals working from home, you might see the stock market a little different than everyone else right now, especially if you have time on your side. This is because many of the stocks that are valued very poorly right now are in sectors of the market that are heavily affected by the pandemic, especially travel, hospitality, service, and many others that depend on the normal interaction we are used to. This means that many companies are only valued so low right now because of the times. People are going to fly again, people are going to go out to eat again, and people are going to be taking vacations again. This means there could be a lot of great companies that are just waiting for life to return to normal to bounce back, making them a fantastic steal for the long run.
At the end of the day, it all depends on your specific financial situation. How much time you have, how much are you willing to risk or even can risk, and where you want to be in 1, 5, 10, or however many years down the road. Whether the pandemic has drastically affected you or not, now is the time to take control of your finances. Make sure that you, your money, and your goals are safe in these troubling times and contact us at Ortiz World Wealth. Stay safe and remember to Plan Smarter & Live Better.