Assessing your investment portfolio in the middle of a pandemic

Assessing your investment portfolio in the middle of a pandemic

Many have seen a decline in the value of their investments during this pandemic. Here's what times like these can teach us about proper investment management.

If you've followed stock markets for the past six weeks, you've surely noticed the global decline we've experienced since COVID-19 effects fully took hold. For long-term investors, while this may be concerning it's generally not a reason to panic and sell your investments to avoid further losses. However, times like these are always a good time to re-assess your portfolio to make sure it contains investments suited to your overall tolerance for risk and the time left until you'll need to rely on them for income. If you're looking over your portfolio, here are three things you should be thinking about:

1. How much time do I have left before I plan to retire?

Generally, the less time you have until you retire, the less volatility (risk) you can afford to take on within your investment portfolio. This is simply because you'll have less time for your portfolio to recover should it experience a loss like the one it may have recently.

2. Do I have the right amount of risk in my portfolio right now?

A lot of this depends on your answer to #1. For example, if you're planning to retire in the next five years and have a portfolio heavy in tech stocks, you may want to scale back the risk in your portfolio. Conversely, if you're only 30 but have a lot of your RRSP or TFSA tied up in guaranteed interest certificates (which are virtually zero-risk but offer little to no return), you may want to move some of your portfolio into riskier investments like stocks. While stocks fluctuate in value each day, over the long term they generally outperform guaranteed investments. Remember - while too much risk can be dangerous, taking too little risk can be just as harmful to your long-term retirement goals.

3. Who can help me look at my portfolio and tell me if I'm invested in the right things?

While you may be fairly well-educated in the areas of investment management/financial literacy, it's always a good idea to work with an investment professional when looking over something as important as your retirement savings. A licensed advisor can determine a suitable risk level for your portfolio, and also recommend investments to give your portfolio the right combination of diversification and growth potential. For example, I offer portfolio reviews as a free, no-obligation service to anybody who's looking for help in this area.

So, just to re-iterate - selling investments in the middle of a steep market decline generally isn't the right move. Doing this usually 'locks in' your losses and prevents you from being able to take advantage of any stock market recoveries. But, this is a great time to take a close look at your portfolio to make sure it's giving you the the best chance at reaching your long-term financial goals.

If you'd like any insight or a second look at your current portfolio, I'm happy to lend a hand. Feel free to get in touch with me any time.