5 Things To Do With Your Investments Instead of Selling

Here’s some advice that may be harder to abide by than the near-impossible mandate to stop touching your face: Don’t touch your portfolio.

During the last financial crisis investors who tamed their itchy trigger fingers fared dramatically better than those who sold out of the market for even a short period of time, according to a Fidelity study of more than 11 million 401(k) accounts.

Fidelity found that those who pulled money out of the market when things got ugly (at the end of 2008 and beginning of 2009) and waited until March 2010 to venture back in lost an average of nearly 7%. The savers who rode it out and acted like it was business as usual — continuing to contribute monthly and maintaining their stock allocation from September ‘08 through March 2010 — watched their 401(k) balances rise roughly 22%.

Clearly the best thing for your long-term financial health is to resist touching your portfolio. But if doing nothing feels impossible — or if you’ve already fiddled around with your 401(k), IRA or other investment account — there are some productive things to do with your hands while we wait for the market to eventually recover.

1. Undo any rash decisions you’ve already made

Good for you if you remained in your seat while the stock market slammed the door on more than a decade of unprecedented growth. Understandable if you did the opposite and located the nearest exit and ran.

Now’s the time to walk back any moves you made in the heat of the moment. If you stopped contributing to your 401(k) or other workplace retirement savings plan, start it up again. (The maximum you can contribute in 2020 is $19,500, or $26,000 if you’re over age 50.)

Those automatic investments into your account are the smartest way to get back into the market right now. Buying at different times — sometimes low, sometimes as stocks are on the upswing — smooths out the average price you pay for your investments. And it’s a lot better than the psychological stress of trying to time a single re-entry with all of your money.

2. Hunt down investment fees 

Want something to obsess over? Focus your nervous energy on sussing out investment fees. 

Investment fees — such as mutual fund expense ratios, account management fees  — are like heart disease: A slow and silent killer. On the surface a 1% to 2% fee may seem like no big deal, but they deliver a double blow to your investment returns. First, the money spent to cover fees is money that doesn’t get invested. And then there’s the long-term sacrifice of compound growth those dollars could have earned.

A 2% annual management fee on a $100,000 investment will cost you nearly 40% of your final account value over 25 years.

According to Vanguard calculations, paying an annual 2% management fee on a $100,000 investment will cost you nearly 40% of your final account value after 25 years. Use FINRA’s Fund Analyzer tool to see the impact of those “small” investment fees over time.  And then swap out high-fee investments (anything charging 1% or more) for a lower-priced competitor.

3. Review your investment mix

Your carefully crafted asset allocation plan — e.g. 60% of your portfolio in stocks, 30% in bonds and 10% in alternative investments — is likely way out of whack right now. With the market getting slammed, you’re probably way underweighted in stocks. 

Under normal circumstances experts recommend adjusting your positions if they drift 5% or more from your target allocation. But these aren’t normal times. At this point with the market’s current volatility — not to mention our own emotional volatility — you might want to wait for things to settle down to rebalance your portfolio. (If you’re invested in a target-date retirement fund, you don’t have to do a thing: It rebalances automatically over time.)

What you can do is start allocating a larger percentage of your new investment dollars into stocks. Instead of selling other assets and locking in your losses, you’ll be righting the scales by buying stocks while they’re on sale. 

4. Talk it out with a financial pro

You don’t have to white knuckle it alone. If anxiety about your portfolio outweighs anxieties about the Covid-19 epidemic, replacing lost wages and keeping your family safe and otherwise occupied, reach out to talk to a financial advisor. A fee-only financial planner can provide personalized perspective on your situation and model near- and long-term outcomes to make recommendations.

If you don’t have one, now’s a good time to shop around for one to establish a relationship — especially if you’re about to retire. Search for an advisor using the National Association of Personal Financial Advisors at NAPFA.org, and do a quick background check using FINRA’s broker check tool. 

MORE: 5 Questions You Must Ask a Financial Advisor Before You Hire Them

A financial planner is going to ask for detailed information about your retirement budget, so go ahead and put that on your to-do list for Covid-19-enforced down time.

5. Get back in the saddle and boost your emergency savings at the same time

Any money you need for the short term (as in five years or less) should not be invested in the stock market. (Here’s where that dough belongs.) But that doesn’t mean that you can’t hedge your bets a bit and get the best of both worlds — access to cash reserves and exposure to long-term growth.

The IRS lets you withdraw contributions from a Roth IRA at any time without paying taxes or penalties.

A Roth IRA allows you to shore up your emergency savings while also providing the opportunity to get better returns on some of your cash by investing a portion in stocks, mutual funds, ETFs or other assets. If you absolutely need access to the cash before retirement, the IRS allows you to withdraw your contributions (not any earnings) at any time sans income taxes or early withdrawal penalties. And if you don’t have to tap the account early, your investment dollars are left there to continue to grow tax-free. That’s the advantage of a Roth IRA versus a traditional IRA. 

MORE: Where to Open an IRA

You have until July 15 to contribute to an IRA for the 2019 tax year, and until next April to fund it for 2020. Contribution limits for both years are $6,000 if you’re under 50 and $7,000 if you’re 50 or older. 

You don’t have to invest the money you contribute to a Roth IRA right away. Like we said before, inching back into the market while prices are low is a good way to start. (For more see our step-by-step guide on how to open an IRA.)

More on HerMoney: 

• Podcast: Suze Orman on Coronavirus, Your Retirement and Recession Fears
• How to Deal With a Market Dip If You’re About to Retire
• Feeling Anxious? Depressed? Here’s the Toll It’s Taking on Your Finances

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