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OPINION

JUST PLAIN TALK: Avoid money mistakes with investments

Buz Livingston

Sometimes during economic downturns, companies reduce or eliminate their 401K matching contributions. If that happens, don’t stop contributing to your retirement plan. Assuming your job is secure, don’t let the headline news sway your decisions. Even without a match, retirement is years away, and your stash grows tax-deferred. If your company makes any type of contribution to your retirement plan, it’s free money. Many retirement savers can take advantage of tax arbitrage by setting aside money when they are in a higher tax bracket then making withdrawals while they are in a lower one.

Another mistake is making changes based on short-term returns. The first two quarters of this year had a few scary months, but if retirement is decades away, the near-term results are background noise. Granted, if you want to remodel or fund college in a few years, it’s a different call.

Great haste makes great waste. In times like these, making decisions gives a semblance of control or order, but avoid doing something rash, especially financially. One of the best things people can do, in good times or bad, is to track their spending, regardless of how much household income you earn. With heightened market volatility, it may be tempting to move to cash. The people who did earlier this year got burned. With market timing, you have to be right twice; once when you sell, then again when you

get back in the market. You may do it once or twice, but eventually you will lose, probably significantly. With online trading tools, it’s easy to bail out. Avoid an impulsive decision. One option may be a less aggressive portfolio. If you don’t use an advisor, it’s essential to read; start with Bill Bernstein; you can knock out some of his books in a few hours.

Since more people work from home, there has been a dramatic rise in online trading, mostly speculative, and it won’t end well. When you buy a stock, someone is selling it on the other end; there’s always a buyer and seller. You could be dealing with another “smuck” stuck at home like you. Still, more likely, it’s either a sophisticated computer program or a highly trained individual who has forgotten more about this company than you know. Have a written plan regarding investments and spending, then stick to it.

You may not know much about history, but no two recessions are identical. One commonality is they are a normal part of the business cycle and economic growth. The longest bull market run in American history followed the Great Recession of 2008-2009; something very few, if any, saw at the time. A virus caused the current economic downturn, and bungled responses around the world worsened it. America still has the most robust, most resilient economy in the world. We need to stop looking for bad luck and knocking on wood.

Buz Livingston

You can’t always get what you want, but Buz Livingston, CFP, can help you figure out what you need. For specific advice, visit livingstonfinancial.net or drop by, masked, 2050 West County Highway 30A, M1 Suite 230.