COVID-19: Market Update May 26

By Walter Koon, , CFA® CFP® and Evan Fruits | | 5.28.20

Koon Financial Greenwood Bloomington Indiana

The most common question we have received during this pandemic and the market volatility is: “How are you holding up? I bet you are really stressed? Are your clients calling freaking out?”. Thankfully, the answers to those questions surprise people. Our clients, like us, have not been “freaking” out. Why? Because we plan for this! Did we expect this pandemic to happen and for the economy to come to a complete halt? Of course not. No one predicted that. However, we do plan for worst case scenarios.

Our job is more than just analyzing the investments in our client’s portfolios. In order for us to serve our clients properly, we have to take a deep look at the whole financial picture. What does their monthly income and expenses look like? What debt might they have? What are they saving for? We have to know these factors in order to effectively structure their portfolio. As a result, we customize a client’s portfolio to their unique needs. This takes us back to the reason we do not “freak” out during these times. We have planned for these downturns. We know that in each of our client’s portfolios, they have enough in safe investments to meet their monthly needs to weather these storms.

With that said, situations such as the current COVID-induced environment provide opportunities for everyone to take a step back and look at their specific financial situation. We are all in a different situation depending on age, income, debt, etc. There is no blanket advice that suits everyone’s individual needs. With that said, below are a few items to consider during this time.

• If you are in your 20’s-40’s, there should not be a whole lot of panic with your retirement investments. You have plenty of time recover from this downturn. Your focus should be more on how to increase your retirement contributions during this time and beyond.

• Emergency Fund: If there was ever a reason to have an emergency fund, this is it! A reduction in income or losing a job is a common problem during this period. However, having a pile of money that covers 3 to 6 months of living expenses can make those situations easier. Not having to go into debt or stress about making the next couple mortgage payments can assist in make more sound financial decisions during these times.

• For those in retirement, nearing retirement, or really anyone, take a deep look at your monthly spending during this time. Most likely, you have not had the opportunity to do a lot of discretionary spending, so this is a great time to figure out your fixed living costs each month. Finding this accurate number can allow for better long-term planning in all aspects of your life, including your investment portfolio. If we know the minimum amount you need from your investments, we can structure a portfolio that gives you comfort and provides long-term growth.

• Social Security: For those deciding on when to take social security, strongly consider delaying benefits until beyond Full Retirement Age. In a period of low interest rates for the foreseeable future, allowing your social security amount to grow at a guaranteed 8% each year until age 70 is a great strategy if you can afford to so.

• Roth Conversions: We are still very big proponents of doing Roth conversions. Of course, it is a strategy that should be discussed with a professional and is dependent on each individual’s unique situation. However, converting money from your traditional IRA to your Roth during a down market can be very beneficial long-term. This will add taxable income in the year you do the conversion, but we still feel the odds are for taxes being higher in the future. We will have to pay for the stimulus money somehow!

We may not be able to control what the market does, but we can control the other factors of our financial life. Use this time to reassess the whole financial picture. As always, we are here and happy to help guide you through that process.

Individual portfolio decisions are based on your investment time horizon and your tolerance of the constant fluctuation in your market value and/or your degree of dependence on distributions. Longer-term investors will continue to emphasize a diversified portfolio of growth-oriented investments. I strive to create risk-controlled portfolios consistent with your circumstances and situation and to develop a long-term relationship. I welcome your comments and questions about the views expressed above.

Please note: you may request a copy of the most recent filing of our registration with the Securities and Exchange Commission- ADV Part II by contacting Walter L. Koon, Jr., CFA, CFP at our address, or by going to