Amid a bevy of unstable events, like a global pandemic, the tipping of the scales of power in the political arena, social unrest, employment uncertainties and a slew of other 2020-borne calamities, it’s very understandable to contemplate burying your life savings in a jar in the backyard in case things inevitably continue hitting the fan. Yet, silver linings abound, if only you can see beyond the now. Don’t go looking for the perfect jar to bury your nest egg quite yet – one good thing that could arise from the 2020-2021 circus is the possibility of improving your financial footing through investing.
“There are a lot of uncertainties; the world has always had uncertainties; yet the stock market continues to do well overall,” said Karl Riner, senior vice president and branch manager of UBS Financial Services in Mount Pleasant. There are several factors, Riner continued, that have the potential to drive the market higher. “People are anticipating a fairly decent stimulus package – that money will find its way back into the market and into the economy. Also, with the rollout of the vaccination process — as more people get vaccinated, they will gain confidence and get out there and spend.”
Georgia French, a senior vice president and wealth manager of UBS Financial Services in Mount Pleasant, agreed that there is a good chance the markets will continue to do well. “The market is a forward pricing mechanism — it’s pricing ahead; it’s not pricing yesterday’s news. It’s also quite resilient in that there is almost always somewhere to make money – there are always opportunities, the mystery is how you find them,” she explained.
French suggested thinking about the average American consumer when it comes to investments. “As soon as they can get out of the house, they can’t wait to get on a plane, go on vacation, go to a concert, go to a club or even get married. The aggregate household savings have nearly doubled in the last year because most people were staying in and not spending that money. I think that money is the fuel that will keep the markets positive in 2021,” she said.
Of course, the question is when those good factors will occur and create some volatility in the markets. Negative impacts range from COVID-19 death rates to flight restrictions to new government policies, and all may affect unemployment rates or the ability to vaccinate as many people as possible.
Riner likened the stock market’s movements to that of a boy walking uphill while playing with a yo-yo. “As investors, keep your eye on the boy and not the yo-yo,” he explained. “If you consider that perspective, it gives great confidence. That’s not to say you don’t get pullbacks; on average, the markets correct themselves five percent about three times a year, and it’s part of investing.”
So then, what should you do with your money? In simpler times, younger people were generally encouraged to take monetary risks, while older generations tended to play it safe with low-risk options, but these times are not so simple.
“Older people, who used to be savers, are now having to invest to get some return on their money because there is no yield on traditional savings or CDs anymore,” Riner continued. “They are not in a position to take a lot of risk, so they need to make sure they understand what they’re doing in order to support a pension or social security. The unfortunate aspect is that bank accounts don’t pay anything now, so they should seek other options and guidance to invest in a conservative manner.”
As for the younger crowd, investing remains an ideal option. “The beauty of the stock market is that, over time, you’ll get handsome returns – nine to 10 percent on average, over a 10-year period,” he said. Eliminating as much debt as possible, saving as much as possible and taking advantage of 401K plans, IRAs and other retirement accounts as early as possible are just a few of his suggestions.
“Invest at birth, if you can,” he grinned. “It’s invaluable. Parents or grandparents often get minors accounts or set up 529s for tax benefits for education, savings, et cetera.”
“Last year was a year for growth stocks; I think this year might be a year for value,” French said. “I’d be looking for value stocks and small cap growth companies. Emerging markets are looking good, but I’d be selective in the bond market because interest rates are low, and you’re not being paid to take interest rate risk.”
Ultimately, no matter your age, French and Riner agree that investing is a wise choice. “My message daily is, ‘Today is one day in a very long period of time,’” French said. “If you’re in your 20s, 30s, 40s, 50s or even 60s, you can’t just put that money under the mattress, and the bank’s interest rates are ridiculously low. You have to put your foot in the water and invest – you don’t have to put your whole self in, but test the waters.”
By Anne Shuler Toole