Episode 2: Handling Your Investments During a Bear Market

About the Episode

On this episode of Making it Count, hosts Cristina and Will discuss the uncertainty surrounding the stock market as a result of the COVID-19 pandemic with guests Rob Mazur and John Stanton of CUNA Brokerage Services. With so much news and expert recommendations, it’s difficult to keep it all straight and know what advice to follow. Tune into our latest episode of Making it Count to ensure you’re getting the news and tips you need to stay informed during this uncertain time.

4:05

Cristina asks Question 1: “Is it normal to feel panicked about money in a time like this?”

Rob answers: “Absolutely, especially in this case. Everybody’s been affected within this.”

John adds: “It’s making people, instead of just looking at themselves, have to look at the big picture and how it's affecting the world. I think that’s what everybody needs right now – to think about others before ourselves and put ourselves in the shoes of people who have been affected worse than us.”

6:20

Will asks Question 2: “What does it mean to be in a bear market?”

Rob answers: “A bear market is when you’re down 20% from the previous peak. In this case, that previous peak was February 12. The last bear market was the financial crisis in 2008.”

7:45

Cristina asks Question 3: “Why shouldn’t I move everything out of the market and wait until things get better to put my money back in?”

John answers: “You’ll miss the opportunity for growth when it comes back. There are realized and unrealized losses. Losses aren’t realized until you sell. If you stay in, it’s unrealized. When the market does come back, you don’t have a chance to make that gain again. As long as your plan allows you to stay in, it’s really about being focused and logical about your plan.”

Rob adds: “As the market goes up, people always see the next thing that is going to tip and bring it back to negative again. It’s difficult to figure out the re-entry point – to know when things will really get better. In hindsight, we can say ‘That’s exactly when you should have gotten back in again,’ but when you’re in the middle of it, it’s very tough to pick that re-entry point.”

10:25

Will asks Question 4: “Why has the market moved up and down by what seems like 1000 points on the Dow everyday?”

Rob answers: “There are a number of traders in the marketplace that have taken over the day-to-day trading and take advantage of the smaller movements. There’s a lot of short-term chop because many longer-term investors have stepped away.”

Learn more: The Sum Up: Almost Everything Wall Street Expects in 2020

12:05

Cristina asks Question 5: “In your experience, has there been a variation of the different types of investors and how they would react in a bear market?”

John answers: “It’s experience. We always talk about investment experience as minimal, moderate, or extensive. Someone with minimal experience might get too emotional at this time and look to move funds out because they don’t understand how it could hurt them in the long run. Someone in the middle, same thing – they still allow emotions to get to them. Someone with extensive knowledge, they would know it’s kind of like a BOGO right now. Stocks are basically on sale and they can put aside emotions to take advantage of the situation.”

Rob adds: “When you’re talking about money, removing the emotions from it is the best thing you can do.”

14:30

Will asks Question 6: “In terms of education, what does your role as financial advisor do to help people work through a bear market?”

John answers: “It’s just setting people up to continue their investment plan. When we take information from people, we’re not listening to respond, we’re listening to learn. Once we learn, we can give them the strategies to help them get where they’re wanting to go based on how much risk they’re comfortable with or their time frame. It’s an individual thing and you need to do what’s right for you. Don’t let your emotions get the best of you. I can only give you advice and information to try and get you into the right direction.”

Rob adds: “It’s all perspective. Reframing the situation. We’ve been through this before and it’ll happen again.”

Learn more: 6 Benefits of Hiring a Fiduciary Financial Adviser

17:20

Cristina asks Question 7: “What’s the first thing we should do in a bear market?”

Rob suggests: “The first thing you should look to do is reevaluate your plan. What’s my timeline – retirement that’s in 15, 20 or 30 years into the future or is it shorter-term? That helps frame the discussion. Then look at your asset allocation. The goal is to buy low and sell high. We may need to sell bonds and buy stock to rebalance. Rebalancing can be tough to do on your own, which is why there are so many bonds out there that will rebalance for you, or working with an advisor.”

John adds: “You might have to reevaluate and might need more liquidity in a safer spot if you’re in a position where you’re out of work and depleting your savings.”

Learn more: 6 Best Practices for Asset Allocation in Retirement

19:40

Will asks Question 8: “Once people have looked at their asset allocation, what’s the next thing they need to be doing?”

John says: “After that, in this market, put more money in if you have the funds. Don’t be afraid. If you believe in our economy and your risk level hasn’t changed, do what’s called Dollar Cost Averaging – buy some things at a lower price.”

Rob suggests: “The other thing to think about, too, is evaluate whether or not something is really a good deal because it’s cheaper right now or are you working off stale data? It’s really wading through all the data points that get washed over us and then wading back in as things stabilize – not diving back in.”

22:10

Cristina asks Question 9: “What can people do to reassure themselves about their money?”

Rob answers: “Perspective is the big thing. If you look at the chart of the markets, you’ll see that things do build over time and that we’ve been through these things before.”

John adds: “Education is key. How can you make a decision without really knowing what’s going on? Be aware of your needs now and what your needs are going to be based on what you’ve set up for yourself. Having a professional help you with that is not a bad idea.”

26:50

Will asks Quick Question 1: “Are there some types of stocks that are better to buy during a bear market?”

Rob answers: “Look at companies with strong balance sheets. A good indicator of that is whether or not something pays a dividend. A dividend is a return of excess capital within a company – money the company doesn’t need so they return to shareholders.”

27:30

Cristina asks Quick Question 2: “Should people start buying stocks now?”

John answers: “If you can afford to, yes. Things are on sale so you’re buying them at a lower rate than, say, a month ago. That being said, it comes down to your risk levels and what you’re comfortable with. Keeping emotions out of this is the biggest deal breaker when it comes to a long term plan.”

Learn more: The Sum Up: You could be losing money with these common investing mistakes

27:55

Will asks Quick Question 3: “A listener asks: ‘I’ve always heard that bonds should work opposite stocks, yet many bond funds and ETFs are down right now.’ Why is that?”

Rob answers: “This has to do with asset allocation. The reason you have both stocks and bonds is because when stocks aren’t doing well, bonds are theoretically supposed to do better. Unfortunately, sometimes there is short-term unlinking of that negative correlation. We had that at the beginning of this crisis where there was a liquidity fear and corporate bonds went crazy because there wasn’t a perceived buyer’s market. We do get short-term disruptions, but normal order restores and that’s what we’ll start to see happen now.”

29:40

Cristina asks Quick Question 4: “How long should we expect to see this bear market last and what should we see first recover: the stock market or our economy?”

John answers: “It’s one of those things that no one really knows. The Fed has done a really good job of keeping rates lower. When this does pass, people will be more apt to throw some money into mortgage refinancing and things like that. I see both coming back – the market probably coming back first and the economy would follow. Once people get that confidence that the market’s doing okay, that’s when you’ll see the economy pick up right after.”

Rob adds: “You tend to see the market recover six to seven months before the economy does. The ‘typical’ bear market lasts about 14 months. Who knows if this is typical or what. The path out of this, you’ll have to see the curve flatten and taper downward in terms of the number of cases. Then there’s going to have to be a treatment that’s going to come about for it and then there will be a vaccine for it. How those things happen and how quickly, I don’t know. The market will turn out of this first before the economy will.”

31:55

Will asks Quick Question 5: “What about people who haven’t invested before? Is it a good time to start investing?”

John answers: “As long as you have time, sure. Investing today, there’s no guarantee you might lose in the short-term. If you have time and know what your plan is, don’t be too afraid. The key is sitting down with a professional to get that picture drawn for you and be educated on the investment that you’re doing.”

32:40

Cristina discusses some good news in the U.S. News and World Report, mentioning an article that focuses on the new CARES Act. This act was signed into law on March 27, 2020 and could benefit investors. Cristina invites Rob and John to share their thoughts on the CARES Act.

Rob says: “The CARES Act is the Government’s fiscal response to all this. This biggest thing for people is the direct payments. The $1,200 payments, $500 per child under 17. That’s going to be a very big part whenever that starts to flow. We’ve already seen the small business part of the bill (Paycheck Protection Program). They’re talking about restocking that with another $350 billion, and who knows what that number will end up being. This was well received. Then you’ve got the unemployment provisions. Once that stimulus starts to flow, it’ll really only help from the investment perspective.”

John adds: “It’ll take the edge off and allow people to get back to the workforce, replenish some of what they lost. The only way for things to get better is to go out and spend. Whether it be getting loans or just buying groceries. Educate yourself on the market, how bad things can be and how long it took them to get out of those certain phases.”

Rob jumps back in: “We talk about the liquidity that’s come through all this. That will present itself with some excess liquidity. If you can afford to take some of your stimulus payment and begin to take part in investing in the cycle, it’ll only help the economy and the market.”

37:50

We want to share our new blog, On the + Side. This blog series focuses on positive news, wellness tips and helpful resources during this uncertain time to help you keep in good spirits. You can read the latest edition of On the + Side by clicking here.