Another week, another whirlwind of good and bad news. Last week, nearly 6M people filed for unemployment, bringing the total number of filings to almost 15 million. The stock market, however, is starting to climb because the central banks have stepped in. And in perhaps the happiest news of all, daily confirmed cases of the coronavirus have started to decrease.
With all of the changes that are happening on a seemingly daily basis, is there anything that investors - or really anyone - can take advantage of right now? Rob Chatterton offers his top five financial opportunities that may apply to you or someone you know.
Buy stocks when they are low.
Right now, Rob says, the stock market is lower, but the stocks themselves are not technically cheap. Over the next three weeks, companies will be reporting their earnings. With millions of people out of work, he doesn’t expect that earnings will beat expectations. In this time period, we predict that the stock market will continue to have extreme volatility, and with that will come the opportunity to buy stocks.
This doesn’t mean you need to come up with new money; you simply need to change your allocation (for example, if 40% of your portfolio is in stocks, your financial advisor can help you allocate some of those funds to change to 60% stocks instead). Again, this does depend on what your risk tolerance is - if you want to take this opportunity to be more aggressive with some of your long-term investments, discuss it with your financial advisor.
Take advantage of suspended RMDs
If you are retired, you are likely familiar with required mandatory withdrawals. With all that’s occurring now, you might anticipate that your income will be lower this year and you aren’t looking forward to taking an RMD on top of it. But there’s good news: With the passage of the new CARES Act, RMDs have been suspended for 2020.
Rob suggests that a possible opportunity is to take the money that would have been withdrawn and to instead convert it to a Roth IRA. The best time to convert to a Roth is when the markets are low, and there has been speculation that taxes may go up in the future to help offset the cost of taxpayers’ stimulus checks. Converting to a Roth means that you’re paying taxes now - so instead of a tax deferment, your investment will grow tax-free. Talk to your financial advisor and see if this opportunity may be right for your situation.
Tax loss selling
A tax-loss sale occurs when you sell an investment that lost money and buy something similar. If you have an account that is jointly owned, or a trust account and it lost money, you would need to realize those losses to reduce those taxes in the future. This strategy only applies to non-retirement accounts only, but it is a great time to go over those accounts with your financial advisor and see if there is any opportunity for you.
Paycheck Protection Program (PPP)
If you are a small business owner (under 500 employees), there is a huge opportunity with the recently announced Paycheck Protection Program. Sole proprietors and independent contractors are also eligible.
Under the PPP, small business owners can provide monthly payroll for employees (per employee, this number is capped at $100k, so if your employee makes $150k, they would have to be lowered to $100k to qualify). Calculating monthly income (yearly income up to $100k divided by 12), you would multiply the monthly number by 2.5 - this is the amount of money you would borrow, and the limit is $10 million.
This loan can be used for payroll, salaries, rent, mortgage interest, healthcare, or utilities - and if used for this purpose, this loan is forgivable. Talk to your business bank to see if you qualify.
Mentoring Opportunity with Your Family
Use this time as a family to learn more about finances and improve your financial IQs together. Play board games - Rob recommends Monopoly or CASHFLOW to learn the basics of investing.
You may also want to look at the entrepreneurial side of things - maybe a family member has just graduated college but hasn’t found a job yet, or perhaps you’re ready for a career change. Rob recommends taking inspiration and knowledge from these books:
- Entrepreneurial Leap by Gino Wickman (good for teens who are interested in entrepreneurship)
- The E Myth Revisited by Michael E. Gerber
- The 7 Habits of Highly Effective People by Stephen Covey
- Dare to Lead by Brené Brown
- Start with Why by Simon Sinek
- Unique Ability 2.0 by Catherine Nomura and Julia Waller (buy the notebook as well)
- Strengths Finder 2.0 by Tom Rath
How can we help?
We know that the coronavirus has affected many people and that it’s a scary and uncertain time for many. Our first priority is that you take care of yourself and maintain your health and wellbeing. If you have any questions, please don’t hesitate to reach out and let us know how we can support you. Our team is always available to speak over the phone or through video conferencing.
The Team at Chatterton & Associates
Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss. Past performance is no guarantee of future results. Please note that individual situations can vary. Therefore, the information presented here should only be relied upon when coordinated with individual professional advice.