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3 great suggestions to bounce back if you lose money due to Covid-19

May 25, 2020 | 15:39

Your investments may have lost a lot of value over the last month or two during the coronavirus pandemic, there are a few things you can do (or avoid doing) to make the best of the situation financially. 

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3 great suggestions to bounce back if you lose money due to covid 19
You may have lost investment in the past few months (Photo: Nonparallelonline)

1. Avoid withdrawing your cash if you can

When you check your account balance and see that it's significantly lower than it used to be, it may feel like you've lost loads of cash essentially overnight. But remember that you don't actually lose any money until you sell your investments. So if you can avoid withdrawing your cash, you'll also avoid locking in your losses.

If your financial situation is dire right now, you might feel like you have no choice but to tap your retirement fund to make ends meet. While the CARES Act has made it easier to dip into your savings by waiving early-withdrawal penalties and loosening the restrictions around 401(k) loans, it's still best to avoid pulling your money out of the stock market unless it's absolutely necessary. By leaving your investments alone as much as possible, you'll reap the rewards later once the market recovers.

3 great suggestions to bounce back if you lose money due to covid 19
Avoid withdraw your cash (Photo: Mybanktracker)

2. Continue investing if you can afford it

It can be intimidating to invest right now, because it may feel like you're simply throwing your money away by investing during a recession. But right now is actually one of the smartest times to invest.

Stock prices are lower when the market is down, which isn't necessarily a good thing when you've watched your investments plummet in value. But lower stock prices also mean you can get more for your money when you invest. Then, when the market eventually recovers and stock prices increase, you can sell your investments when they're worth more. In other words, this is a prime opportunity to buy low and sell high.

Of course, millions of Americans have lost their income, so not everyone can afford to invest right now. Before you throw more money into the stock market, make sure you have a healthy emergency fund. The last thing you want is to invest and then have to pull your money out a few months later, so any cash you invest should be money you know you won't need for the foreseeable future.

3 great suggestions to bounce back if you lose money due to covid 19
Keep investing (Photo: Investopedia)

3. Evaluate how your investments are allocated

Asset allocation refers to what types of investments make up your portfolio. Yours likely consists of a mix of stocks and bonds, with stocks being riskier and bonds being more conservative. When you're young and still have decades before you retire, you'll want to invest more heavily in stocks. Although you may see greater setbacks during market downturns, your money still has plenty of time to recover.

As you get older, though, you should be adjusting your asset allocation so your portfolio is weighted more toward conservative investments like bonds. That way, your investments won't be hit quite so hard during a major market downturn.

3 great suggestions to bounce back if you lose money due to covid 19
Assess how your investments are allocated (Photo: Fortune Financial Advisor)

For some people, this stock market crash may have served as a wake-up call that they were investing too heavily in stocks. While you may not want to move all your money toward bonds right now (it would take even longer for your investments to recover since bonds have lower average rates of return than stocks), it's something to consider once your investments rebound. It's still a good idea to keep some money invested in stocks no matter what, but the closer you get to retirement age, the more conservative your portfolio should be.

Your investments may have seen better days, and there's no telling just how long it will be before the stock market fully recovers. It's normal to feel concerned about recent investment losses, but by taking these three steps, you can ensure you're setting your future finances up for success.

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