Stay the Course!
November 1, 2020

The economy is struggling with the effects of COVID-19, but what does that mean to you?  In these uncertain times, it is easy to get emotional and stop making investments that seem to keep losing value.  But even in a bear market recession, we have to plan and prepare for our financial future.  In fact, having a well thought-out financial plan has taken on a more prominent role than ever.  Since planning for retirement is done on an individual basis, it is important to understand the consequences and strategies of investing (or not investing) your hard earned money.

Investing for No Gain is a Loss

It is safe to say that if you had left your money under the mattress on February 19, 2020, you’d probably be better off in the following months.  As some markets declined as much as 35%, no return at all is better than a loss, right?  The truth is, once you account for inflation and cost of living increases, a dollar today does not hold the same value as a dollar tomorrow.  Therefore that seemingly secure money you keep under the mattress or even in typical savings account for that matter is still losing value; on average 3% per year. 

Your financial advisor can give you a list of investment options that are appropriate for your risk tolerance and time horizon. 

It’s Not a Loss Until You Sell

So your retirement fund has been hit hard as a result of the recent global financial crisis.  If you’ve been investing aggressively, perhaps you lost a significant portion of your retirement fund.  What do you do now?  First things first, try not to act on emotions.  While it is true that selling out of your positions and investing into some sort of retirement CD will stop the bleeding, at that point you may be stitching the wound with a knife!

The thing to remember about most investments is that you haven’t actually lost any money until you sell.  At that point, you realize specific dollar losses.  Suppose you “lost” 40% of your retirement due to a market collapse, how will you make it back?  Remember the basic principle of any transaction is to buy low and sell high.  Selling low is a financial no-no!  Not many investment options have the ability to make up these losses even over time.  The best strategy is to make a plan, and stick to it. 

Balancing the High and the Low

As we all know, what goes up must come down.  But if history has taught us anything, we know it doesn’t have to stay down.  In fact with respect to the stock market over time, it has historically  come back stronger than before.  Here-in lays the benefits of dollar cost averaging.  Dollar cost averaging is the process of investing a fixed amount into a mutual fund (or other investment vehicle) at a predetermined interval.  Many of us practice this strategy by investing a percentage of our income into a 401(k) or 403(b) plan.  The logic behind this strategy is that over time, you will be investing at different stages and prices in the market.  For example, say you are investing one year in a bull market, and prices are higher.  Over the next few years, you are investing in a bear market, where prices have now decreased.  The higher prices are offset by the lower prices allowing you to accumulate shares at an “average” dollar cost, somewhere in between.  Of course it is difficult to watch your hard earned money disappear as we saw this spring.  But if you act on emotions, you are altering your investment strategy and overriding the rationale behind it.  If losing money is not an option, consider more secure investment options.  The most important thing is to establish a sound financial plan and stick to it.  

Past performance is no guarantee of future results.  All investments involve risk, including possible loss of principal.  Dollar cost averaging is a technique for lowering the average cost per share over time. While dollar cost averaging has definite advantages, it cannot assure profit or protect against loss in declining markets. Dollar cost averaging involves continuous investments over time regardless of fluctuating price levels. The investor should consider his or her ability to continue to invest in periods of low price levels.


Elizabeth Paal Goss is a Registered Representative of Lincoln Financial Advisors. Securities and investment advisory services offered through Lincoln Financial Advisors Corp., a broker/dealer (Member SIPC) and registered investment advisor. Insurance offered through Lincoln affiliates and other fine companies. 307 International Circle, Suite 390, Hunt Valley, MD 21030.Heritage Financial Consultants, LLC is not an affiliate of Lincoln Financial Advisors Corp. CRN-3098153-052220