PORTLAND, Maine — Lauren Oschman is a certified financial planner through Vestia Advisors; which offers planning services through Vestia Advisors, an RIA with the SEC. Securities are offered through Ausdal Financial Partners.
"2020 has been a wild ride in the markets," Oschman says. "I’m talking with investors of two minds right now: One, that the volatility is just too much and they would rather sit out of the market until things calm down; and two, that the market is on such a rise post-election that they have missed the possibility for further gains and shouldn’t invest more cash right now." The answer, she says, depends on how much time you have.
"Be sure you have a good cash reserve (3–6 months of fixed expenses) and if you aren’t saving beyond that for a major purchase, investors shouldn’t feel the need to 'time' their investing based on current volatility," says Oschman. For example, if you work in healthcare, your chance for losing your job in this COVID-19 economy are lower than someone who maybe works in the hospitality industry. If you have a higher risk of furlough, or being laid off, it makes sense to have closer to 6 months of expenses saved up.
If you can afford to wait for your investment return and you don't need the money right away; it's easier to invest. "While many believe that age should be the biggest determinant of how much risk you take, even most younger investors are surprised to find that a moderate risk portfolio will get them the results they require to reach their long-term goals," Oschman explains.
If volatility makes you nervous, you can reduce risk by diversifying. "Rather than buying all S&P 500 funds, buy a mix of international/US, small/large, growth/value and be sure your funds own lots of companies. That can reduce your risk while giving you exposure to similar returns," says Oschman.
Watch our interview with Lauren Oschman for more tips for navigating 2021 investments.
Learn more about Vestia Advisors here.