5. Diversify to match your risk tolerance If you’re a regular reader of this column, you’ll know that we’re big proponents of the benefits of diversification. Simply put, by spreading your portfolio “eggs” across many market “baskets,” you protect yourself should any one basket break. Sure, you can make a lot of money by taking concentrated positions in a small handful of investments. But, for most snowbirds, the protection of diversification is usually a lot more important than the chance of striking it filthy rich on a single hot stock. During times of market volatility, it’s evenmore important to ensure that the level of diversification in your portfolio aligns with your risk tolerance. Ask yourself: is your portfolio overweight (say, more than 10% of overall value) in any one company, one sector or one market? Would a 20% decline in that overweight holding put a significant dent in the overall value of your portfolio, or force you to change your retirement lifestyle? No? Then by all means, continue with your more concentrated strategy − you may well be handsomely rewarded for it. But if you answered yes, then now is a good time to protect yourself by trimming back and spreading those eggs among several different baskets: different companies, different sectors and different geographic markets. 6. Add some new income... One of the best solutions to bear market anxiety: money coming in the door. In addition to its obvious benefits in terms of your ability to pay the bills, a source of steady, reliable income can have a very important psychologically calming effect during difficult times. If you have the ability to develop another source of income, do it now. Perhaps you can work part time, or do some freelancing, consulting or a small contract job every now and again. Maybe you can “monetize” your hobby by selling your creations online. Or maybe you can get into the rental game, either by purchasing a rental property or renting out your home, your basement, or even a single room for short-term stays. Of course, not every snowbird is interested in any of this stuff − for some of us, retirement means getting as far away from work as possible. And that’s OK. But if you find yourself fretting about your finances during these times of turmoil, it’s worth taking a look to see if you can bring in a little “extra.” Even if it’s only a couple of hundred bucks a month, you’d be surprised how that little extra can make a big difference to your peace of mind. 7. ...while taking care of the income that you already have Over the past decade, many retirees have come to realize the benefits of having a rental property in their retirement portfolio. The regular income that’s (mostly) independent of market movements can be a rock-solid financial foundation to cover baseline expenses, while providing significant peace of mind, too. But ask any landlord: you can’t play “set it and forget it” with a rental property like you sometimes can with a stock portfolio. That goes double in times like these, when that steady rent cheque is responsible for your financial stability and peace of mind. Take some time now to check in on your income property: make sure that your tenant is happy and that everything continues to work smoothly for them. If you have the opportunity to make a low-cost upgrade (a new appliance, for example) or a simple renovation (a new coat of paint) that helps to secure your relationship, it’s probably a good investment to make. Take care of your income stream by investing the time, effort and attention needed to keep that income coming in the door. 8. Sweep up the dirt Veteran investors know that not every investment works out the way they want it to. Here’s another thing that they know: how difficult it can be to admit. It’s tough, knowing that despite all of our effort, knowledge and skill, we made an investment mistake. And so, we hold on to positions in the hopes that they will come back − even though the money may be put to much better use in a different opportunity. Now that we’re in a bear market, the time has come to sweep up the “dirt” that’s accumulated in your portfolio by selling losing positions. Depending on your individual circumstances, such a move may generate tax savings; generally speaking, investors can claim capital losses to offset taxes owed on any gains made up to three years ago. (Please make sure to check with a qualified accountant to ensure that such a strategy makes sense for you − it depends on your personal financial situation.) In a bear market, sweeping up the dirt has another benefit: it frees up cash that you can reallocate to opportunities created by the bear market. It’s a classic “buy low, sell high” strategy, and one of the best ways to take advantage of the cross-the-board turmoil that often leaves high-quality companies on sale. Yes, it’s tough psychologically. But financially, it’s often a winning strategy. Finance 40 | www.snowbirds.org
RkJQdWJsaXNoZXIy MzMzNzMx