06 Jul A Comeback Cut Short
Right when the country seemed to finally be getting back on the right track our progress has been derailed once again. What was once a summer full of hope that the worst was behind us, has now given us more questions than answers. With many states now implementing more stringent laws on COVID safety, and other states even closing up recreational spaces as if it was the first day of the quarantine, one could begin to wonder if things are getting better or worse. Wall Street has not been giving too many answers on the economy’s direction as the market continues to react heavily to everything that comes out in the news. Even with plans set in place and talks of a new stimulus bill, the markets still have not quite found their bearings. A volatile market, a country out of work, and a disease that we still cannot quite understand. The road ahead of us may be shrouded in doubt but that does not mean that we cannot prepare for it. And to be prepared, you must be aware.
in March, we were all issued a ‘safer at home’ restriction. Urging us to stay at home unless necessary, such as to get groceries, prescriptions, or to go to work if your occupation was deemed necessary. This order put millions of Americans out of work temporarily, some indefinitely, and changed the way that everyone worked and played across the country. Bars, restaurants, clubs, theme parks, and anywhere people gathered to have a good time were shut down until the Covid-19 outbreak was contained. The problem is that it still is not contained, and it is not going to be for a while. It does not help that the recent reopening of restaurants for dine-in has been once again suspended considering recent spikes of coronavirus cases across the country which have been across the news headlines. State officials have had to take action, but many are questioning if closing down dine-in and bars for another 3 weeks is really a step towards the solution, or if it is just digging a deeper hole for state budgets. California is already facing a massive budget deficit from all the lost tax revenue, and now they are facing another three weeks of restrictions on dining out. With the service and hospitality industries being a massive part of the tax revenue for the state, as well as providing employment to millions of residents, it is not likely that the state can go on much longer enforcing restrictions.
If you have been one of the millions of Americans financially affected by COVID-19, it is important to understand that you can fight back but how though? Well, there are some things we can all do to better prepare for the long fight we have ahead of ourselves, but everyone’s financial situation is different. Different situations require different solutions. But there are some things we all could be doing to better prepare. It is a simple answer with many steps; save your money. And saving money always starts with a budget.
First things first you need to trim off all the fat from your current budget. So, look at ways you could be spending unnecessarily.
- -Limit eating out: even if you are ordering in, those delivery fees and tips can add up if they become an everyday expense.
- -Meal Prep: Let’s face it, you are at home, and snacking has become a new favorite past-time. Buying in bulk or even growing your own food are great ways to save money and even spend some time in this quarantine. Not like you are going anywhere right?
- -List your car as stationary: If you and others in your household are working from home or not working at all, why pay extra on your car insurance if you aren’t driving anywhere!
- -Limit Subscriptions: Websites like TreuBill.com help you track all of the spendings from your account and eliminate wasteful expenditures from your budget at the click of a button.
- -DIY: From cutting hair to hanging cabinets, we have youtube to help us with more than funny cat videos. See what you can learn to do by yourself to save a few more dollars.
Once you have cleaned up and tailored your budget to fit the current economy, try to see what government assistance programs you are eligible for. Remember, the government has set aside $2 trillion of taxpayer money for families and businesses who have been affected by COVID-19 whether it be financially, contracting the virus, or both. So, make sure that you are not passing up on any money that could be in your pockets. After all, your taxes are what is paying for these relief funds.
Now that you have a pandemic budget and have applied for whatever government assistance you can, it’s time to put your money to work. In a standard economy, most brokers/investors look towards Wall Street for a basic buy and hold strategy. You and your broker pick out a few different companies that you are very confident in or at least familiar with, and you buy equity in that company. You and that equity ride the waves of the economy up and down with the economy and by the end, your investment has grown. Unfortunately, COVID-19 has thrown a mighty wrench into the engine of our economy. Not enough to stop the beast, but enough to make it unpredictable. Basic buy and hold strategies can no longer work in this type of economy since everything is happening much faster. You see the buy and hold strategy works best for those who do not expect to need any money from their investment for many years. In today’s economy, people could need their money a lot sooner than that. When the president announced travel restrictions, the American travel sector plummeted. The same happened after the quarantine was announced. Only a few days later our government passed the $2 trillion stimulus package and investors’ positive outlook gave Wall Street a much-needed pulse, and the ups and downs have yet to stop. It seems to be that quick changes are going to be the status quo for the rest of the COVID-19 economy. This does not mean that we must stay away from equities as if they had COVID, it just means we must approach them differently. Tactical investing can still make very good use of the stock market, but not without a diversified portfolio.
Diversification has two goals in tactical investing. the first is to find a balance of growth, security, and liquidity in your portfolio, all three of which are important in times like these. The second goal is to find the balance of these attributes that directly applies to your current financial/life situation. This balance is usually found from the three basic asset classes: equities (stocks), fixed income (bonds & CDs), and cash equivalents or money market instruments. The equities provide the growth, the bonds provide the security and the money market funds give your portfolio liquidity. But with the market looking the way it does, and the pandemic affecting every American in some way, now more than ever it is important that you utilize alternative asset classes into your portfolio. Alternative asset classes such as real estate, precious metals, and commodities allow you to spread your money outside of market volatility. This provides you with an added layer of security while giving you more control over the type of growth and liquidity you want in your portfolio since alternative investments differ from each other greatly. Real Estate markets across the country have been seeing growth due to the historically low-interest rates. Commodities may have taken a recent hit, but oil is not going to go away any time soon, no matter how many solar panels we install. In today’s economy, it is important to utilize unique tools to handle the unique situation that COVID-19 has put us in.
Of course, stocks are still a very versatile and powerful tool when creating a well-diversified portfolio. And just because the market as a unit is more volatile than ever, does not mean there are not still companies out there that are not consistently growing even under the given circumstances. Companies such as Amazon, Apple, and Netflix have only seen growth during these times. But that is to be expected from these giants. Other smaller corporations such as DocuSign, Wing Stop, and Zoom have held promising numbers throughout the entire pandemic and do not show any signs of letting up. Companies like these alongside the slowly growing job market are giving investors hope that a brighter future is closer than it may currently seem.
If you and your family have been affected by COVID-19, you do not have to sit and wait for the government to send a check to your mailbox and solve all your problems. You also do not have to wait for a magic vaccine to appear out of thin air to start putting your money back to work. If you have been financially affected by COVID-19 like most Americans, call us here at Ortiz World Wealth to pandemic proof your portfolio. If now is not the time to take control of your finances I am not sure what the right time would look like. We may not be sure of what the future holds for us as far as the coronavirus pandemic, but we do know that we are all in this together and that with the right amount of work and the right amount of planning we can prepare ourselves for whatever 2020 may throw at us next. And remember, Plan Smarter & Live better.