Tips from a Financial Pro

Maricela Ramos
Maricela Ramos

Maricela Ramos has been a wealth manager serving the South Florida community for 30 years. In 2012, she founded MAR Wealth Management Services. She shared some insight with Lifestyle Media Group on money management during trying times.

What advice do you have for older Americans watching their 401(k) implode?
Older Americans with 401(k) accounts should have determined their risk tolerance and investment time horizon to have invested their accounts accordingly with the proper asset allocation. This should have been accomplished prior to the current crises. This is crucial to ensure their retirement savings will meet their goals and objectives.

Having said that, the wise thing to do now is to stay the course. Panic selling is never a wise strategy. … History has shown that bear markets are followed by bull markets, and economic recessions are followed by economic expansions. The average business cycle lasts between five to six years, so someone in their 50s who has a large allocation to equities still has plenty of time to recover before being able to withdraw funds without penalties. I’m not suggesting ignoring one’s portfolio. To the contrary, those concerned about their 401(k) accounts should now take the time to become more familiar with their portfolios and financial goals.

If your portfolio’s asset allocation is not aligned with your risk tolerance, investment time horizon, and financial goals, use this time to develop a plan to restructure the portfolio when markets recover.

What about the younger generation, who may not remember the crisis in 2008?
Younger Americans should also determine their risk tolerance and investment time horizon, structuring their portfolios accordingly. The benefit of being young is that time is on their side, so a young person’s portfolio will recover and continue a growth trajectory even if they suffer a few years of negative returns along the way. In my opinion, for young people, this is a great opportunity to be investing in equities.

Is this a good time to sell or buy in the stock market?
It’s never a wise strategy to be selling while the markets are in a panic. Nonetheless, if you have unmet near-term cash needs and, therefore, selling is necessary, then consider raising cash by selling stocks with weak balance sheets and preferably with gains. Hold on to positions with strong balance sheets and positive free cash flow. If you have a portfolio that is currently invested in the markets, and you do not need to withdraw funds in the short-term (six to 12 months out), you should continue with your current investment plan.
I will add that market volatility always brings opportunities. While buying stocks when the market is falling is hard to do, it is the wise thing to do if you are investing for the long term. If an investor has cash to invest, I recommend searching for stocks with strong balance sheets, positive free cash flow, and selling at a discount to their fair market value. Employ dollar cost averaging as picking a bottom is practically impossible to do.

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