A woman with a face mask passes the New York Stock Exchange (NYSE) on February 3, 2020 on Wall Street, New York.
Johannes Eisele | AFP | Getty Images
It’s no secret that fears of coronavirus have infected the market and fueled concerns about a potential global economic downturn.
Yet, even in the midst of scary headlines and big market downturns, most financial experts have two tips for individual investors: Don’t panic.
“The number one regret among Americans is a failure to save for emergencies and a failure to retire,” said Mark Hamrick, a senior economic analyst at Bankrate.com’s personal finance page. “An episode like this is a solid reminder that we still need to do both of those things.”
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And when it comes to your money, there are several areas that could be affected by the spread of coronavirus.
Here’s what we know now – and what you should think about before making any scary knee moves that you may eventually regret.
When it comes to your investments, the biggest questions you need to ask yourself are what are your goals and time horizon.
For example, if you are investing in retirement, it is a long-term endeavor. Even closer to retirement at age 65 or 70, you’re still likely to go through more market cycles to come, Hamrick said.
Other short-term goals – such as buying a new home this spring or sending your child to college in the fall – are good reasons to reduce the amount of risk you take.
But if fears about how coronavirus can damage your net worth keep you up at night, it’s also a good time to revisit the risk you’re taking.
That’s what Certified Financial Planner Marguerita Cheng, CEO of Blue Ocean Global Wealth in Gaithersburg, Maryland, helped a client in January by moving them from a concentrated position in China to a diversified international fund.
This is the right time to check the hose and see if you can handle this level of market volatility, Cheng said. If you can’t, you may want to move to safer investments.
Anyone who wants to sell their shares right now must remember that it is difficult to double the market.
“You may know that now is the time to get away,” Cheng said. “But you won’t know when you need to get in.”
The areas in question may want investors to avoid stocks related to airlines, cruise ships, casinos and games, said Daniel Milan, a financial advisor and managing partner at Cornerstone Financial Services in Southfield, Michigan.
You may want to re-evaluate the exposure of multinational companies that rely on China or Asia in their supply chains, Milan said. These include, for example, Apple as well as semiconductor manufacturing companies.
“It should be a longer recovery for those airlines or stocks of passenger species, even more than it would for semiconductor or technology companies,” Milan said.
A Chinese man is wearing a protective mask as he walks during a snowfall on an empty commercial street on February 5, 2020 in Chinese Beijing.
Kevin Frayer | Getty Images
Small capsule stocks could also last, depending on how long the coronavirus impact lasts, said Shawn Cruz, trading strategy manager at TD Ameritrade. These companies often rely on suppliers in China or other countries exposed to that country, he said.
For some investors, the key is not to make big, bold moves as they try to get to the market.
“Buy carefully; maybe you can’t put all the money you have to make right away,” Cruz said. “Eat small snacks here and there.”
Mortgage costs may be lower
One positive effect of the current market is the impact it has on lower mortgage rates, said Greg McBride, chief analyst at Bankrate.com.
“This opens the door for refinancing wide open, especially for loan borrowers who took out loans a year ago when mortgage rates were 4.5%,” McBride said. “Deducting $ 150 from your monthly mortgage creates a special breathing room on your household budget.”
If you are looking for a new mortgage on the market, make sure you arrange your paperwork, McBride said. These include bank statements, payment payments, and tax returns.
“Many lenders will be bottled and the applications they will be working on are those that have all their documents,” McBride said.
As with all changes in the economy, all eyes are on the Federal Reserve to see what the central bank can do.
Before the coronavirus outbreak, investors predicted the Fed could cut interest rates this year.
“Obviously in the current environment, that expectation is only growing further,” Hamrick said.
Lower rates would make it cheaper for individuals to borrow money, but even harder to earn on their savings.
Earlier, Fed officials said they thought the interest rates were already set correctly. Fed Vice President Richard Clarida made the point in his speech this week.
Fed Chairman Jerome Powell is unlikely to give a new update on what the central bank is thinking until the next scheduled meeting for March 18, Hamrick said.