When there’s a change of leadership in the White House, many investors feel compelled to make changes with their investments, too. But making a sudden departure from an investing strategy can often do more harm than good, particularly when it comes to retirement savings. Conventional wisdom dictates sticking with the fundamentals of asset allocation and keeping a long-term perspective.
Behind the Headlines
It’s no secret 2020 was an extremely volatile year for the stock market, reflecting the turmoil of our country. The S&P 500 Index actually dropped 35% early in the year, and then recovered 60%, resulting in a total return of more than 16.26% as of 12/31/20.1
This impressive performance proved many Wall Street pundits wrong. If you’re surprised by the outcome you’re not alone. While dramatic headlines pull readers in, they often distort the truth. If you’re investing for the long term, understand that short-term market chaos is just that. Having a plan in place can help to insulate you from the noise.
Election Produced Positive Results
After this election, the S&P 500 Index surged to a high of 14.3%2. However, opinions are divided if this positive momentum can or will continue. While there is good news of late, including the roll-out of vaccinations to combat the coronavirus and the Fed signaling it won’t raise rates, many Americans are still experiencing financial hardship and businesses are struggling to stay afloat.
To help the economy in 2020, the Federal Reserve kept interest rates near zero and has indicated it will not be raising rates for several years, to spur growth and encourage borrowing3. Unemployment numbers are improving, as more jobs return. If vaccinations roll out, the effects of the pandemic should diminish quickly, and with it a rise in consumer confidence. And when consumers are confident, they will make financial moves that puts money back into the economy.
Of course, there will continue to be seasons of volatility. That’s why it’s important to keep on track with your investing goals and continue saving money for the future. Avoid making fear-based decisions, even when you see your investments drop in a short timeframe. Follow an investment strategy that matches your time horizon and risk tolerance, and you’ll be more likely to handle market swings. An investment strategy will also help you avoid placing funds into investments that are too aggressive or conservative based on your personal financial goals.
Unless you are retiring within the next few years, you can take more risk with your investments as you have more time to recover from market declines.
Get Advice When You Need It
Do you need help figuring the best asset allocation for your investments? A qualified financial professional can help you plan or update your investment strategy based on overall market conditions. SchoolsFirst FCU has a team of financial advisors4 ready to help. They can tailor personal investment and retirement strategies to help you achieve your financial goals. Speak with one of our investment professionals by visiting your nearest branch location or by contacting us at 800.462.8328, ext. 4116.
4.Representatives are registered, securities sold, advisory services offered through CUNA Brokerage Services, Inc. CUNA Brokerage Services, Inc. (CBSI), member FINRA/SIPC, a registered, a registered broker/dealer and investment advisor, which is not an affiliate of the Credit Union. CBSI is under contract with the financial institution to make securities available to Members. Not NCUA/NCUSIF/FDIC insured, may lose value, no financial institution guarantee, and not an obligation of the Credit Union. Not a deposit of any financial institution.
CUNA Brokerage Services Inc. is a registered broker/dealer in all 50 states of the United States of America. Pursuant to the Economic Growth and Tax Relief Reconciliation Act of 2001, qualified distributions from a 529 college savings plan are tax-free.
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