Many investors feel stuck right now, and for good reason. It’s hard to know what’s the right move to make when you’re concerned about the economy, baffled by the stock market, and worried that your investment plans are no longer valid.
And yet, there are some investors who are moving forward during the Covid-19 pandemic, who have gained greater clarity and control despite the tremendous uncertainty out there.
Here are four things that are helping investors make progress in the current climate. If you’ve been at a loss about what to do with your investments, perhaps there’s something here that can help you get back on track.
1. Active investing strategies are helping investors adjust to rapidly changing markets
During the bull market years, you could buy and hold a few stock funds, perhaps an index ETF, and as long as the market kept going up, you did pretty well. But investing is not that simple these days.
Few investors can stick with a buy-and-hold approach during the huge swings in stocks that we’ve seen this year, so they’re turning to active investing strategies to help them respond to changing markets.
“During a recession when the market is volatile, active money managers can exploit market dislocations while applying risk-management tactics more efficiently,” US News explained in a recent article.
A survey of Fidelity advisors in early April 2020 found that “41% of financial advisors were looking to increase clients’ allocations of active investments,” Barron’s reported.
FundX specializes in active investing, and when the stock market sell-off steepened in early March, we moved into funds that were less correlated with the stock and bond markets. This helped stem losses and it also reassured our clients who didn’t want to wait around to see how far the market would fall. And because we maintained substantial positions in leading stock funds, we also participated in the market’s strong gains in April.
Active investing doesn’t always work perfectly (no investment strategy can promise that), but so far, it has helped investors navigate this year’s wild markets.
2. Financial planning is helping people adjust their retirement plans
Many investors are rethinking their retirement plans and wondering if they can still retire in the coming years or what to do if they need or want to retire earlier.
An April 2020 study surveyed people before and after the Covid-19 pandemic began and found that “the onset of the covid-19 crisis led to a wave of earlier than planned retirements.”
At FundX, we're working with a physician who had planned to retire in the next 3 to 5 years, but given the pandemic, she’s now looking to retire this year. Our certified financial planner is working with her to plan for an earlier retirement. He’ll analyze her investments, adjust the risk of her portfolio, stress-test her plans and work through how to best replace her income so she’ll have the financial stability she deserves.
By working with a financial planner, she can focus on her patients, where her skills are most needed right now, without having the added stress of trying to cobble together a retirement plan on her own.
Click here to learn more about financial planning at FundX.
3. Advisors are helping retirees suspend and return their RMDs this year
Many retirees had already withdrawn part or all of their required minimum distributions (RMD) from their IRAs this year, so when the CARES Act, the stimulus bill that passed in late March, waived RMDs this year, they weren’t sure what to do.
FundX advisors have been helping clients return any RMDs they’ve taken in the last few months. (You can return an RMD to one IRA only if the RMD was made within the last 60 days in what’s called a 60-day rollover. If you made a distribution outside the 60-day window, you cannot return it.) We’re also carefully looking for strategic times to buy back in as clients return their unwanted RMD back to their IRA accounts.
This way, retirees will be able to save on taxes (since their RMDs would have been taxed as ordinary income), and they’ll keep more money in their retirement accounts this year to grow tax-deferred in future.
4. Sustainable funds are helping investors own strong companies
Sustainable investing looks beyond a company’s financials; it also considers a company’s environmental, social and governance (ESG) risks, and that’s become increasingly important in this environment.
A recent study found that “companies that protected their labor forces and supply chains during this year’s stock-market drawdown saw more net inflows from institutional investors and better returns than their industry peers,” the Wall Street Journal reported.
Sustainable funds make it easy for investors to own companies with strong ESG measures, and these funds have also done well this year. “So far this year, 70% of sustainable equity funds have returns that land in the top halves of their Morningstar categories,” Morningstar’s Jon Hale wrote.
FundX has been managing portfolios of sustainable funds for more than 20 years. If you’d like to learn more about our approach, click here to set up a time to talk with an advisor.
A version of this originally appeared on Forbes.