The COVID-19 pandemic has taken a toll on our society in many ways, including affecting the overall economy of the country. For investors, this means facing significant losses as the result of a locked-down system. Those losses have changed the risks investors are willing to take, so the first step is to reassess the acceptable risks you can take with your portfolio. Once you establish your new risk tolerance, you’ll be ready to create a new investment strategy.
Establish New Goals
Before COVID-19, you may have been well on your way toward achieving your goal of early retirement, but the economic downfall has probably affected your financial resources. As a result, that goal may be off the table or delayed. This is the time to set new goals for yourself, such as paying off a second mortgage, taking a vacation, or paying down newly acquired debts.
Balance Your Portfolio
Many businesses have failed since the start of the pandemic, which, in turn, has affected the equity and debt investments you have in your portfolio. This is the time to meet with your investment advisor to adjust your investments and create a more balanced portfolio. Your investments should be adjusted to fall within your risk tolerance range, while still helping you meet your new goals.
Recalculate Your Budget
As you regrow your wealth, you will also want to make sure your day to day financial needs are still being met. Unfortunately, the value of U.S. currency has also taken a hit, which means some necessities will cost more. Even if you haven’t felt a financial pinch yet, you should be eliminating unnecessary expenses in anticipation of leaner times. Cancel unused subscriptions and memberships, buy coffee in bulk, and make other money-saving changes to help you get through hard times.
While the economy is starting to recover, there’s no way to know if it will continue on an upward trend. A new COVID-19 spike can destroy the progress we’ve already made, so it’s also important to prepare for that eventuality. Many people are preparing by taking on second jobs and looking for alternative sources of income. For most people, relying on a single source of income is no longer a possibility. Growing your wealth and increasing your income to expense ratio will help you outlast the current economic downturn.