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By Michael Christodoulou

You’ll find some big differences between traditional and speculative investments — and knowing these differences can matter a great deal when you’re trying to reach your financial goals.

To begin with, let’s look at the basic types of traditional and speculative investments. Traditional investments are those with which you’re probably already familiar: stocks, bonds, mutual funds, government securities, certificates of deposit (CDs) and so on. Speculative investments include cryptocurrencies, foreign currencies and precious metals such as gold, silver and copper.

Now, consider these three components of investing and how they differ between traditional and speculative investments:

The first issue to consider is risk. When you own stocks or stock-based mutual funds, the value of your investments will fluctuate. And bond prices will also move up and down, largely in response to changing interest rates. However, owning an array of stocks — small-company, large-company, international, etc. — can help reduce the impact of volatility on your stock portfolio. And owning a mix of short- and long-term bonds can help you defend yourself somewhat against interest-rate movements. 

When interest rates fall, you’ll still have your longer-term bonds, which generally — but not always – pay higher rates than short-term ones. And when interest rates rise, you can redeem your maturing short-term bonds at potentially higher rates.

With speculative investments, though, price movements can be extreme as well as rapid. During their short history, cryptocurrencies in particular have shown astonishingly fast moves up and down, resulting in huge gains followed by equally huge, or bigger, losses. The risk factor for crypto is exacerbated by its being largely unregulated, unlike with stocks and bonds, whose transactions are overseen by well-established regulatory agencies. There just isn’t much that investors can do to modulate the risk presented by crypto and some other speculative investments.

A second key difference between traditional and speculative investments is the time horizon involved. When you invest in stocks and other traditional investments, you ideally should be in it for the long term — it’s not a “get rich quick” strategy. But those who purchase speculative investments want, and expect, quick and sizable returns, despite the considerable risk involved.

A third difference between the two types of investments is the activity required by investors. When you’re a long-term investor in traditional investments, you may not have to do all that much once you’ve built a portfolio that’s appropriate for your risk tolerance, goals and time horizon. 

After that point, it’s mostly just a matter of monitoring your portfolio and making occasional moves — you’re not constantly buying and selling, or at least you shouldn’t be. But when you speculate in crypto or other instruments, you are constantly watching prices move — and then making your own moves in response. It’s an activity that requires considerable attention and effort.

One final thought: Not all speculative instruments are necessarily bad investments. Precious metals, for instance, are found in some traditional mutual funds, sometimes in the form of shares of mining companies. And even crypto may become more of a stable vehicle once additional regulation comes into play. 

But if you’re investing for long-term goals, such as a comfortable retirement — rather than speculating for thrills and quick gains, which may disappear just as quickly — you may want to give careful thought to the types of investments you pursue.

Michael Christodoulou, ChFC®, AAMS®, CRPC®, CRPS® is a Financial Advisor for Edward Jones in Stony Brook. Member SIPC.

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By Michael Christodoulou

Michael Christodoulou

Another school year will soon come to a close. And if you have young children, they’re now a year closer to heading off to college or some other type of post-secondary education or training. So, if you haven’t already done so, you may want to start preparing for these costs.

And they can be considerable. During the 2022-23 school year, the average estimated annual cost (tuition, fees, room and board, books, supplies, transportation and other personal expenses) was nearly $28,000 for public four-year in-state schools and more than $57,000 for private nonprofit four-year schools, according to the College Board.

Of course, some students don’t pay the full bill for college. Any grants and scholarships they receive can bring down the “sticker price.” Still, there’s often a sizable amount that students and their families must come up with. To help fill this gap, you may want to explore various strategies, one of which is a 529 education savings plan.

A 529 plan offers several key benefits. First of all, your earnings can grow tax deferred and your withdrawals are federally tax free when used for qualified education expenses, such as tuition, fees, books and so on. You may be eligible to invest in a 529 plan in most states, but depending on where you live, you may be able to deduct your contributions from your state income tax or possibly receive a state tax credit for investing in your home state’s 529 plan. Tax issues for 529 plans can be complex. Please consult your tax advisory about your situation.  

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And 529 plans aren’t just for college. You may be able to use one to pay K-12 expenses, up to $10,000 per student per year. (However, not all states comply with this 529 expansion for K-12, so you might not be able to claim deductions and your withdrawals could be subject to state tax penalties.)  

A 529 plan can also be used to pay for most expenses connected to apprenticeship programs registered with the U.S. Department of Labor. These programs are often available at community colleges and combine classroom education with on-the-job training.

Furthermore, you can now withdraw funds from a 529 plan to repay qualified federal private and student loans, up to $10,000 for each 529 plan beneficiary and another $10,000 for each of the beneficiary’s siblings.

But what if you’ve named a child as a 529 plan beneficiary and that child doesn’t want to pursue any type of advanced education? If this happens, you, as the account owner, are free to name another family member as beneficiary.

And beginning in 2024, you may have even more flexibility if a child foregoes college or other post-secondary education. Due to the passing of the Secure Act 2.0 in December 2022, unused 529 plan funds of up to $35,000 may be eligible to roll over to a Roth IRA of the designated beneficiary.

One of the qualifications for this rollover is to have had your 529 plan for at least 15 years. To determine if you qualify for this rollover, you will want to consult your tax advisor.

A 529 plan has a lot to offer — and it might be something to consider for your family’s future.

Withdrawals used for expenses other than qualified education expenses may be subject to federal and state taxes, plus a 10% penalty. Make sure to discuss the potential financial aid impacts with a financial aid professional as Edward Jones, its financial advisors and employees cannot provide tax or legal advice.

Michael Christodoulou, ChFC®, AAMS®, CRPC®, CRPS® is a Financial Advisor for Edward Jones in Stony Brook. Member SIPC.

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Invest in your future on Earth Day. METRO photo

By Michael Christodoulou

Michael Christodoulou

It’s almost Earth Day, when people around the world focus on ways of protecting and preserving the environment. And the lessons from this occasion can be applied to other areas of life — such as investing.

Here are some themes to consider:

Sustainability – From an environmental perspective, sustainability encompasses a range of issues, such as using natural resources wisely. As an investor, you, too, need to protect your resources.

So, for example, to sustain a long-term investment strategy, you won’t want to dip into your retirement accounts, such as your IRA and 401(k), to pay for major home or car repairs or other unexpected, costly bills before retirement.

You can help prevent this by building an emergency fund containing several months’ worth of living expenses, with the money kept in a liquid, low-risk account. And once you’re retired, you need to sustain your portfolio so it can help provide income for many years. For that to happen, you’ll need to maintain a withdrawal rate that doesn’t deplete your investments too soon.

Growth potential – Many people plant trees to celebrate Earth Day, with the hope that, as the trees grow, they’ll contribute to cleaner air. When you invest, you also need growth potential if you’re going to achieve your goals, including a comfortable retirement.

So, your portfolio will need a reasonable percentage of growth-oriented vehicles, such as stocks and stock-based mutual funds or exchange-traded funds (ETFs). Yet, you do need to be aware that these investments can lose value, especially during downturns in the financial markets. You can help reduce the impact of market turbulence on your holdings by also owning other types of investments, such as bonds, government securities and certificates of deposit (CDs).

While these investments can also lose value, they are typically less volatile than stocks and stock-based mutual funds and ETFs. The appropriate percentage of growth and fixed-income investments in your portfolio depends on your risk tolerance, time horizon and long-term objectives.

Avoidance of “toxins” – At some Earth Day events, you can learn about positive behaviors such as disposing of toxic items safely. And in the investment world, you’ll also want to avoid toxic activities, such as chasing “hot” stocks that aren’t appropriate for your needs, or trading investments so frequently that you run up commissions and taxes or jumping out of the markets altogether when there’s a temporary decline.

Consolidation – Getting rid of clutter and unnecessary possessions is another lesson some people take away from Earth Day. All of us, when we look around our homes, could probably find many duplicate items — do we really need two blenders or three brooms or five staplers? When you invest, it’s also surprisingly easy to pick up “clutter” in the form of multiple accounts. You might have an IRA with one financial company and brokerage accounts with two or three others.

If you were to consolidate these accounts with one provider, you might reduce correspondence — even if it is online — and possibly even lower the fees you pay. But perhaps more important, by consolidating these accounts at one place, possibly with the guidance of a financial professional who knows your needs and goals, you may find it easier to follow a single, unified investment strategy.

Earth Day only happens once a year — but it may provide lessons for investors that can last a lifetime.

Michael Christodoulou, ChFC®, AAMS®, CRPC®, CRPS® is a Financial Advisor for Edward Jones in Stony Brook. Member SIPC.

 

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By Michael E. Russell

Michael E. Russell

Surprisingly the stock market has started off very strong. I wasn’t sure this would be the case. There are days when the market makes me feel like Fredo Corleone when he says to Michael that he is SMART, but apparently not so.

The S & P was up 6.5% in January with another 1.5% this past week. The NASDAQ is already up 11% for the year. Incredible! Almost all of the sectors that were crushed in 2022 have led this rally. Technology, financials, entertainment and commodities have recovered nicely. The groups that held up well in 2022 when the S & P fell more than 20% are all underperforming — consumer staples, utilities, and healthcare; these groups are all down approximately 3%.

There have been some crazy upward moves by many stocks. Tesla is up 85 points so far this year; NVDA up 68 points, year to date; Netflix up 72 points … I could go on. Viewers of CNBC have heard many analysts speak highly of NVDA. With the advance of artificial intelligence, this company seems to have found a special niche — a long-term holding.

The Federal Reserve raised rates by the expected 25 basis points. A day later, non-farm payrolls increased by 517,000. This was more than 2½ times the economists’ consensus forecast. The unemployment rate fell to less than 3.5%. This level has not been seen since the mid 1960s. Chairman Powell probably wishes he waited two more days before he announced the Federal Open Market Committee’s ¼% increase. The number would have been closer to ½%. I believe that we will see more rate hikes in the future.

I read some comments made by Warren Buffett’s vice chairman, 99 year-old Charlie Munger. Charlie has been an outspoken critic of bitcoin and all other unregulated digital tokens.  He wrote an article in the Wall Street Journal stating  “cryptocurrencies are a predatory scam targeting ordinary citizens.”  He further stated that “cryptocurrency is not a currency, not a commodity and not a security, instead it’s a gambling contract with a nearly 100% edge for the house.” He made a reference to the British Parliament’s passage of the Bubble Act in 1720. This Act banned trading speculative stock. I think Charlie was in the Parliament at the time of the vote!  Wow, 99 years old and still calling it correctly.

Speaking of surprises, Amazon officials have stated that they will probably have a loss this quarter. How can that be? There are 100 Amazon trucks a day in my neighborhood.

Interest rates have come into play. The 10 -year Treasury is yielding 3.5% while the one and two-year Treasury yield is 4.2%. This is called an inverted yield curve — short term rates yielding more than longer term rates. It does not pay to buy a long term bond while shorter duration bonds yield substantially more.

I try to end each article on a positive note but that is difficult this time. The Federal deficit has now reached a staggering 30 trillion dollars. You read that correctly, 30 trillion dollars. What this equates to is that every man, woman and child in this country are on the hook for $102,000 each. This number can only increase with the spending by the administration and congress. The madness must stop. Our elected officials don’t seem to care that we are reaching a point where this deficit cannot be repaid. We have been printing money with little thought as to how it gets paid back. Our Governor has proposed another $775 million dollars for Long Island schools. Where is the money coming from?  

Remember this article was written this past Sunday. A lot can happen in four days.  Did I just hear a balloon pop? No, a balloon was shot down. That will show them. In closing, I hope consumers are price shopping.  Gas prices vary as much as 80 cents a gallon.  Gouging? Probably. Cucumbers are 99 cents at one supermarket and $2 at another. Better cucumber? More importantly, happy hour prices at some local watering holes are all over the place. Please shop wisely. 

Michael E. Russell retired after 40 years working for various Wall Street firms. All recommendations being made here are not guaranteed and may incur a loss of principal. The opinions and investment recommendations expressed in the column are the author’s own. TBR News Media does not endorse any specific investment advice and urges investors to consult with their financial advisor. 

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By Michael Christodoulou

Michael Christodoulou
Michael Christodoulou

There aren’t many drawbacks to having a high income — but being unable to invest in a Roth IRA might be one of them. Are there strategies that allow high-income earners to contribute to this valuable retirement account?

Before we delve into that question, let’s consider the rules. In 2023, you can contribute the full amount to a Roth IRA — $6,500, or $7,500 if you’re 50 or older — if your modified adjusted gross income is less than $138,000 (if you’re single) or $218,000 (if you’re married and filing jointly). If you earn more than these amounts, the amount you can contribute decreases until it’s phased out completely if your income exceeds $153,000 (single) or $228,000 (married, filing jointly).

A Roth IRA is attractive because its earnings and withdrawals are tax free, provided you’ve had the account at least five years and you don’t start taking money out until you’re 59½. Furthermore, when you own a Roth IRA, you’re not required to take withdrawals from it when you turn 72, as you would with a traditional IRA, so you’ll have more flexibility in your retirement income planning and your money will have the chance to potentially keep growing. 

But given your income, how can you contribute to a Roth?

You may want to consider what’s known as a “backdoor Roth” strategy. Essentially, this involves contributing money to a new traditional IRA, or taking money from an existing one, and then converting the funds to a Roth IRA. But while this backdoor strategy sounds simple, it involves some serious considerations.

Specifically, you need to evaluate how much of your traditional IRA is in pretax or after-tax dollars. When you contribute pretax dollars to a traditional IRA, your contributions lower your annual taxable income. However, if your income is high enough to disqualify you from contributing directly to a Roth IRA, you may also earn too much to make deductible (pretax) contributions to a traditional IRA. Consequently, you might have contributed after-tax dollars to your traditional IRA, on top of the pretax ones you may have put in when your income was lower. (Earnings on after-tax contributions will be treated as pretax amounts.)

In any case, if you convert pretax assets from your traditional IRA to a Roth IRA, the amount converted will be fully taxable in the year of the conversion. So, if you were to convert a large amount of these assets, you could face a hefty tax bill. And since you probably don’t want to take funds from the converted IRA itself to pay for the taxes, you’d need another source of funding, possibly from your savings and other investments.

Ultimately, then, a backdoor Roth IRA strategy may make the most sense if you have few or no pretax assets in any traditional IRA, including a SEP-IRA and a SIMPLE IRA. If you do have a sizable amount of pretax dollars in your IRA, and you’d still like to convert it to a Roth IRA, you could consider spreading the conversion over a period of years, potentially diluting your tax burden.

Consult with your tax advisor when considering a backdoor Roth strategy. But if it’s appropriate for your situation, it could play a role in your financial strategy, so give it some thought.

Michael Christodoulou, ChFC®, AAMS®, CRPC®, CRPS® is a Financial Advisor for Edward Jones in Stony Brook. Member SIPC.

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By Michael E. Russell

Michael E. Russell

As I have mentioned in previous articles, crypto currencies are hard to understand.  I have tried to explain crypto exchanges to the readers while not fully grasping all of the nuances involved in their workings.

We had a financial meltdown in 2008 caused by the corporate giant Enron. We now have a much bigger fiasco caused by a 29-year-old named Sam Bankman Fried. This MENSA wannabe was able to do a Harry Houdini act by making 8 billion dollars in investor funds disappear overnight.

Here are a few of the victims: The Ontario Teachers Pension Plan lost 95 million dollars.  More than 100 affiliated companies are filing for bankruptcy. This financial genius has caused a situation so dire, FTX, Fried’s company stated that it doesn’t know where the assets went or who its top creditors are.

Have no worries folks because Congress is setting up committees to investigate what went wrong. Good news there. UGH! This in itself is a big problem. Apparently, Mr. Bankman Fried lobbied many elected officials in Washington hoping for loose oversight of crypto exchanges.

During the 2022 election cycle, Fried donated approximately 40 million dollars to Progressive Democratic candidates. Senator Kirsten Gillibrand of New York said she would donate the funds she received to various charities.  Nice!  How about having these funds returned to investors?

A question to be asked is why this financial collapse is being investigated after the mid-term elections? Just one more reason for term limits! Point of interest Senators Mitch McConnell and Chuck Schumer have been in office for more than 78 years combined. Come on already!They promise to fix problems that they are responsible for. TERM LIMITS, TERM LIMITS!!!  Wake up everybody.

Enough ranting, what’s next?  Where to invest? As I grow older, Healthcare stocks seem to be a a great area to put money.  Why?  Well, let me explain. This morning I had my 12th doctor visit this month and another one tomorrow to close out November.  During the 1970s Healthcare was 8% of U.S. GDP [Gross Domestic Product]. Today it is more than 20%.

As citizens get better health care and live longer, they also in most cases accumulate more wealth.  Due to more disposable income the Financial services sector is also a place to potentially invest. Within this sector there are areas that should do well over the next five years including Artificial Intelligence, Quantum Computing, Computational biology and CRISPR-related investments. CRISPR gives us exposure to companies specializing in DNA modification systems and technologies.  

What should we be doing in December?  Consider making tax-loss trades to book 2022 losses so that you can offset future gains. The S & P 500 lost a quarter of its value at the indexes low this year. Since October it has regained some territory making it down a mere 15%!  Taking some money off the table and putting it into one and two-year treasuries, yielding 4.5% is not a bad idea. With North Korea, China and Russia rattling their sabers, some safer investments should be considered.  

Here is some advice for pre-retirees. Next year, you will be able to contribute up to $22,500 to your 401K or 403b and other retirement plans — an increase of $2,000.  Americans can also contribute an additional $6500 if you are over the age of 50.  In addition, IRA maximum contributions are now $6500.  

For those of us older folks, bond yields north of 4.5% make a portfolio of 60% stock, 40% fixed income attractive. A final thought, with the S & P down roughly 16%, here are some stocks to ponder. Are they an opportunity? Perhaps. Apple down 16% year to date.  Microsoft down 27%. Alphabet down 34%. Tesla down 45%.  Netflix down 52%. Amazon down 39%. I am not necessarily recommending them, but give them some thought.

I would love to hear from some of you that read my monthly article. I can be reached at [email protected]. From my family to yours, I wish you a happy and healthy holiday season and a prosperous 2023.

Michael E. Russell retired after 40 years working for various Wall Street firms. All recommendations being made here are not guaranteed and may incur a loss of principal. The opinions and investment recommendations expressed in the column are the author’s own. TBR News Media does not endorse any specific investment advice and urges investors to consult with their financial advisor. 

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By Michael Christodoulou

It’s unfortunate, but recessions are a fairly normal part of the economic landscape. When a recession occurs, how might you be affected? The answer depends on your individual situation, but regardless of your circumstances, you might want to consider the items in this recession survival checklist: 

Assess your income stability. If your employment remains steady, you may not have to do anything different during a recession. But if you think your income could be threatened or disrupted, you might want to consider joining the “gig economy” or looking for freelance or consulting opportunities. 

Review your spending. Look for ways to trim your spending, such as canceling subscription services you don’t use, eating out less often, and so on. 

Pay down your debts. Try to reduce your debts, especially those with high interest rates. 

Plan your emergency fund. If you haven’t already built one, try to create an emergency fund containing three to six months’ worth of living expenses, with the money kept in a liquid account. 

Review your protection plan. If your health or life insurance is tied to your work, a change in your employment status could jeopardize this coverage. Review all your options for replacing these types of protection. Also, look for ways to lower premiums on home or auto insurance, without significantly sacrificing coverage, to free up money that could be used for health/ life insurance. 

Keep your long-term goals in mind. Even if you adjust your portfolio during times of volatility, don’t lose sight of your long-term goals. Trying to “outsmart” the market with short-term strategies can often lead to missteps and missed opportunities.

Don’t stop investing. If you can afford it, try to continue investing. Coming out of a recession, stock prices tend to bottom out and then rebound, so if you had headed to the investment “sidelines,” you would have missed the opportunity to benefit from a market rally. 

Revisit your performance expectations. During a bear market, you will constantly be reminded of the decline of a particular market index, such as the S&P 500 or the Dow Jones Industrial Average. But instead of focusing on these short-term numbers, look instead at the long-term performance of your portfolio to determine if you’re still on track toward meeting your goals. 

Assess your risk tolerance. If you find yourself worrying excessively about declines in your investment statements, you may want to reevaluate your tolerance for risk. One’s risk tolerance can change over time — and it’s important you feel comfortable with the amount of risk you take when investing.

Keep diversifying. Diversification is always important for investors — by having a mix of stocks, mutual funds and bonds, you can reduce the impact of market volatility on your portfolio. To cite one example: Higher-quality bonds, such as Treasuries, often move in the opposite direction of stocks, so the presence of these bonds in your portfolio, if appropriate for your goals, can be valuable when market conditions are worsening. (Keep in mind, though, that diversification cannot guarantee profits or protect against all losses in a declining market.) 

A recession accompanied by a bear market is not pleasant. But by taking the appropriate steps, you can boost your chances of getting through a difficult period and staying on track toward your important financial goals.

Michael Christodoulou, ChFC®, AAMS®, CRPC®, CRPS® is a Financial Advisor for Edward Jones in Stony Brook. Member SIPC.

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By Michael E. Russell

Michael E. Russell

What we do know is that often, history repeats itself. We tell our children that they need to learn from their mistakes.  However, we never seem to follow our own advice. So where are we?

Trying to get a handle on how to manage our investments is proving to be difficult at best. The stock market is following every comment by Federal Reserve Chairman Jerome Powell, hoping for a guiding light. 

This past Friday, stocks dropped after a strong opening despite a solid August payroll report. The report showed solid job growth, increasing labor force participation and slowing hourly wage increases. Perhaps this shows that inflation may have peaked. The report was positive enough to unlikely change monetary policy. In spite of this the S & P 500 Index still fell 1.1% with the Nasdaq Composite down 1.3%. This capped an awful August in which the S&P 500 fell more than 4%. That followed July’s 9% gain, the market’s most solid month in more than two years.

Okay folks, the lesson for today is which month to believe. Is this the start of a new bull market or is it a bear market rally?

Let’s talk about a sector of the market that is extremely perplexing. Social media is probably the most influential innovation of the 21st century. Think about this. In 2022, if an event does not appear on a social feed, it never really happened! Most of Wall Street has been blind-sided by social media’s troubles. With every passing year, digital advertising is near a point where the market is saturated.

Case in point: Facebook. This stock, under its new name Meta, traded at $175 during 2017. This past Friday, it closed at $160. Over the past five years it traded as high as $380. As we have learned this past year, market realities eventually trump technology.  (Note:  trump with a small ‘t’).

I have not spoken about Crypto in a few weeks, so here are some thoughts. If Bitcoin is crypto’s answer to gold, Ethereum is the closest thing it has to its own internet.  For example, any person who wants to mint a new token or spend $150,000 on a Bored Ape non-fungible token, or NFT, probably uses the Ethereum network.

As of today, more than $3 billion in transaction volume flows through Ethereum daily. About $60 billion in crypto assets sit on its blockchain through third-party apps.  Other than Bitcoin, there is no network that is more critical to crypto’s infrastructure going forward.

A stock I have owned, Nvidia, has been a casualty of a slowdown in hardware purchases. Recently, on the company’s last earnings call, it was stated that the stock has suffered from a slowdown in gaming and other core areas. It was also stated it could not predict how reduced crypto mining might hit demand for its products. 

All of this new technology is growing way too fast for me. I am still having trouble learning all of the features on my iPhone. 

With school classes resuming and the holidays fast approaching, here are thoughts on some retailing stocks. Target (tgt) looks to be a cheaper stock based on its P/E ratio than Walmart (wmt). There is a potential for 20% upside from its Friday close of $164.  It trades at less than 16X earnings, while Walmart trades at 22X earnings — a 33% discount. 

On the interest rate front, it looks like Chairman Powell will be calling for two more rate increases of 50 to 75 basis points each. Banks will be charging more for car, personal, business and mortgage loans, while paying little if any interest on your savings accounts. Hmm, not fair!!

Just a thought …With the President’s new plan on school loan forgiveness, would it not be a good idea to convert your 30-year mortgage to a school loan? Probably not legal, also just kidding! On a closing note, I just cannot wait for the IRS to put the 87,000 new inspectors to work. Have a great September.

Michael E. Russell retired after 40 years working for various Wall Street firms. All recommendations being made here are not guaranteed and may incur a loss of principal. The opinions and investment recommendations expressed in the column are the author’s own. TBR News Media does not endorse any specific investment advice and urges investors to consult with their financial advisor. 

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By Michael Christodoulou

Michael Christodoulou
Michael Christodoulou

As an investor, you can easily feel frustrated to see short-term drops in your investment statements. But while you cannot control the market, you may find it helpful to review the factors you can control.

Many forces affect the financial markets, including geopolitical events, corporate profits and interest rate movements — forces beyond the control of most individual investors. In any case, it’s important to focus on the things you can control, such as the following:

Your ability to define your goals: One area in which you have total control is your ability to define your goals. Like most people, you probably have short-term goals  — such as saving for a new car or a dream vacation — and long-term ones, such as a comfortable retirement. Once you identify your goals and estimate how much they will cost, you can create an investment strategy to help achieve them. Over time, some of your personal circumstances will likely change, so you’ll want to review your time horizon and risk tolerance on a regular basis, adjusting your strategy when appropriate. And the same is true for your goals — they may evolve over time, requiring new responses from you in how you invest.

Your response to market downturns: When the market drops and the value of your investments declines, you might be tempted to take immediate action in an effort to stop the losses. This is understandable.  After all, your investment results can have a big impact on your future. However, acting hastily could work against you. For example, you could sell investments that still have solid fundamentals and are still appropriate for your needs. If you can avoid decisions based on short-term events, you may help yourself in the long run.

Your commitment to investing: The financial markets are almost always in flux, and their movements are hard to predict. If you can continue investing in all markets — good, bad or sideways —you will likely make much better progress toward your goals than if you periodically were to take a “time out.” Many people head to the investment sidelines when the market tumbles, only to miss out on the beginnings of the next rally. And by steadily investing, you will increase the number of shares you own in your investments. And the larger your ownership stake, the greater your opportunities for building wealth.

Your portfolio’s level of diversification: While diversification itself can’t guarantee profits or protect against all losses, it can help to greatly reduce the impact of market volatility on your portfolio. Just how you diversify your investments depends on several factors, but the general principle of maintaining a diversified portfolio should govern your approach to investing. It’s a good idea to periodically review your portfolio to ensure it’s still properly diversified.

The world will always be filled with unpredictable, uncontrollable events, and many of them will affect the financial markets to one degree or another. But within your own investment world, you always have a great deal of control — and with it, you have the power to keep moving toward all your important financial objectives.

Michael Christodoulou, ChFC®, AAMS®, CRPC®, CRPS® is a Financial Advisor for Edward Jones in Stony Brook. Member SIPC

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By Michael Christodoulou

Michael Christodoulou
Michael Christodoulou

The COVID-19 pandemic may end up changing our lives in some significant ways. To cite one example, it’s likely we’ll see a lot more people continue to work remotely, now that they’ve seen the effectiveness of tools such as videoconferencing. Education, too, may be forever changed in some ways. Perhaps just as important, though, is how many people may now think more about the future – including how they invest.

If you work with a financial professional, you may have connected with this individual over the past several months through a videoconferencing platform, rather than in person. Some people like this arrangement because it offers more scheduling flexibility and eliminates the time and effort of traveling to and from an appointment. Others, however, still prefer face-to-face contact and look forward to when such arrangements will again be practical and safe for everyone involved. But if you’re in the first group – that is, you prefer videoconferencing – you may now wish to use this communication method in the future, at least some of the time.

But beyond the physical aspects of your investing experience, you may now be looking at some changes in your investment strategy brought on, or at least suggested, by your reactions to the pandemic.

For example, many people – especially, but not exclusively, those whose employment was affected by the pandemic – found that they were coming up short in the area of liquidity. They didn’t have enough easily accessible savings to provide them with the cash they needed to meet their expenses until their employment situations stabilized. Consequently, some individuals were forced to dip into their long-term investments, such as their 401(k)s and IRAs. Generally speaking, this type of move is not ideal – these accounts are designed for retirement, so, the more you tap into them early, the less you’ll have available when you do retire. Furthermore, your withdrawals will likely be taxable, and, depending on your age, may also be subject to penalties.

If you were affected by this liquidity crunch, you can take steps now to avoid its recurrence. Your best move may be to build an emergency fund containing three to six months’ worth of living expenses, with the funds held in a separate, highly accessible account of cash or cash equivalents. Of course, given your regular expenses, it may take some time to build such an amount, but if you can commit yourself to putting away a certain amount of money each month, you will make progress. Even having a few hundred dollars in an emergency fund can help create more financial stability.

Apart from this new appreciation for short-term liquidity, though, the foundation for your overall financial future should remain essentially the same. In addition to building your emergency fund, you should still contribute what you can afford to your IRA, 401(k) and other retirement plans. If you have children you want to send to college, you might still explore college-funding vehicles such as a 529 plan. Higher education will still be expensive, even with an expansion in online learning programs.

Post-pandemic life may contain some differences, along with many similarities to life before. But it will always be a smart move to create a long-term financial strategy tailored to your individual needs, goals and risk tolerance.

Michael Christodoulou, ChFC®, AAMS®, CRPC®, CRPS®

Financial Advisor from the STONY BROOK EDWARD JONES

Edward Jones. Member SIPC.

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