Breaking Down the Recent Jargon of the Market


The Dow Jones Industrial Average (DJIA), the S&P 500 and the Nasdaq experienced quite a roller coaster ride in March. There are mixed opinions as to whether it was due to the global economic impact of the seemingly unstoppable new COVID-19 coronavirus or due to the federal government’s delayed response and tactical efforts to constrain the virus. Or, perhaps more likely, both.

Regardless of the reasons, they are largely out of the control of individual investors. So, what do you do? Much depends on your own individual circumstances. As we learn in Investing 101, it’s a matter of getting back to the basics. What are your financial goals? When do you need to achieve them? How much risk are you willing to take?

These three questions basically translate to: How much money do you need, how old are you and what keeps you up at night? If you are near or early in retirement, you may justifiably be losing sleep worrying about the current market volatility. We may be able to help. Feel free to schedule some time to speak with an experienced financial advisor to help you figure out if you should make any changes to your investment portfolio and, if so, what is an appropriate investment strategy for you.

Speaking of Investing 101, let’s break down some of the terms you may be hearing in the financial media to better define what they could mean for your situation.

Sequence of Returns

On the surface, “sequence of returns” means annual performance numbers throughout a period of time. It may just be one or two years, but if the investment markets perform poorly in the year or two before or after you retire, it could have a significant impact on how long your nest egg will last. Individuals who retire right around a significant and/or extended market decline could end up drawing income from their investment principal instead of investment earnings. In this situation, it may be worth considering other options, such as working longer so you can continue contributing to your investment accounts and allow time for recovery.1

Cash Reserves

This means you should have an emergency fund, preferably equal to six months of income —most likely in a bank account. Even if you have these liquid assets, it may be worth delaying projects such as home improvements, expensive travel plans, buying a second home or other major purchases until the markets have stabilized. Having such an emergency fund available can offer a sense of financial security that no amount of beach vacations can equal.2

Defensive Positions

Perhaps you want to stay fully invested in the market, but you’re concerned about losses. According to market analysts at Bank of America Securities, you may want to consider equities with a track record for providing higher yields during periods of volatility. Sectors more likely to thrive during a health pandemic include data centers, grocery-anchored strip malls, medical office buildings, self-storage centers and towers for wireless carriers.3

Wait and See

Not many investors have the stomach to invest more money during a flailing market. However, there may be opportunities to purchase “bargains” — such as airline securities — that are likely to be hit the hardest yet rebound quickly. After all, we will remain in a global economy, and business trips will resume after the pandemic has subsided.

Content prepared by Kara Stefan Communications.

1 Allessandra Malito. MarketWatch. March 15, 2020. “Retiring soon? Here’s how you should handle these crazy market drops.” https://www.marketwatch.com/story/retiring-soon-heres-how-you-should-handle-these-crazy-market-drops-2020-03-09?mod=home-page. Accessed March 24, 2020.

2 Knowledge@Wharton. Feb. 3, 2020. “How to Recession-proof Your Retirement.” https://knowledge.wharton.upenn.edu/article/how-to-recession-proof-your-retirement/. Accessed March 24, 2020.

Tomi Kilgore. MarketWatch. March 7, 2020. “These are the safest and highest dividend-yielding REITs as the coronavirus spreads, BofA says.” https://www.marketwatch.com/story/these-are-the-safest-and-highest-dividend-yielding-reits-as-the-coronavirus-spreads-bofa-says-2020-03-06?mod=home-page. Accessed March 24, 2020.

We are an independent firm helping individuals create retirement strategies using a variety of insurance and investment products to custom suit their needs and objectives. This material is intended to provide general information to help you understand basic financial planning strategies and should not be construed as financial or investment advice. All investments are subject to risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values.

The information contained in this material is believed to be reliable, but accuracy and completeness cannot be guaranteed; it is not intended to be used as the sole basis for financial decisions. If you are unable to access any of the news articles and sources through the links provided in this text, please contact us to request a copy of the desired reference.

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