What the Russia-Ukraine Conflict and Inflation Mean for the Market’s Future
Just like during the good periods, Betterment is practicing good housekeeping.
Russia, Ukraine, and your portfolio
Betterment’s portfolios had minimal direct exposure to Russian equity, debt, and currency. Our 90% Core IRA portfolio, for example, had less than 1% Russian exposure, and our Socially Responsible Investing (SRI) portfolios were even lower. Russian exposure is now effectively zero due to asset freezes and sanctions.
Similarly, there was negligible direct exposure to Ukrainian investments.
What we’re doing (as usual)
Just like during the good periods, Betterment is practicing good housekeeping: rebalancing, tax-loss harvesting, glide-pathing your goals, and performing asset-location rebalances. We’ll continue to look for ways to improve your portfolio and financial plan intelligently. We’re tracking what slower portfolio growth might mean for goal confidence and updating our guidance. We’re looking carefully at market forecasts of inflation, interest rates, and macroeconomics to understand how the situation might develop from here.
Learning from history
Taking a step back, market drops from geopolitical upheaval and supply chain shocks like this tend to be moderate in magnitude (about 10% on average) and short-lived (lasting less than 12 months). They are not a good reason to delay investing. If anything, they can be the opposite; if you’ve been looking for a dip to buy, this is the biggest one since 2020 so far.
Short-term to long-term
Indirect impacts on Americans such as higher commodity prices (wheat and gas) will have short-term spikes, but likely be blunted in the medium- to long-term by domestic resources, policy tools and the adaptability of supply chains and trade partners.
In the long run, this will push countries to reduce reliance on petro-dollars, spurring investment into energy tech/processes. The Russian economy has been set back roughly 30 years, is losing young cohorts to military service or emigration, and is seeing necessary trade evaporate.
Helping, tax efficiently
Donations to humanitarian aid platforms such as UNICEF, Save the Children, and Medicine San Frontiers can be made from your taxable Betterment account. Gifting appreciated shares is one of the most tax-efficient ways to donate money, as you avoid capital gains tax.
Setting yourself up for good decisions
As with any concerning and sensational market moves, give yourself time and space to make considered forward-looking decisions, and not react impulsively to minute-by-minute headlines. If you want to take action, make it surgical (smaller) rather than extreme. Consider what decisions you’ll wish you had made 10 years from now, not 10 minutes.
Consider putting yourself on a social media diet to avoid doom-scrolling – or avoiding the news at night to protect your sleep. Bad decisions tend to be made when you’re tired and anxious.
Only look at your portfolio when markets are closed for the day to avoid knee-jerk responses.
Keep your natural resources up: exercise, go for walks outside, meet up with friends, meditate, and avoid drinking excessively.