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Video: The Market Is Volatile—What Should I Be Doing?

COVID-19 has affected the stock market, and we’re here to give our customers advice on what they can do for their finances during this difficult time.

Articles by Dan Egan
By Dan Egan VP of Behavioral Finance & Investing, Betterment Published May. 06, 2020
Published May. 06, 2020
5 min read

If you’re looking for more guidance, we’ve got you covered with our guide to stock market volatility.

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“Hey everybody. Dan Egan from the Advice and Investing Team at Betterment here, talking about what you can actually do during this downturn.

Now, you might be expecting me to say things like “stay the course, do nothing.” But, I’m not sure if that’s actually very productive. There are things you can be doing to position yourself, and all of us better, during this period. I want to give you some things to do.

I’m going to through three different components.

  1. I’m going to talk about your personal finances. Probably what you’re most interested in, what you can do there.
  2. I’m going to talk to you about your role in society, and tings you can be helping so that all of us, including you, can come out of this better.
  3. I want to talk about the advantages that you as an individual investors have over the professionals, and how to take advantage of them right now.

Number one. Your personal finances.

We often talk here at Betterment about having a Safety Net for emergencies. A key part of that is using your Safety Net during emergencies.

Right now, I’d say you should probably have 4 to 6 months of cash on hand. As much as anything, to make sure that you feel safe. We don’t want you making any kind of impulsive or emotional decision based upon fear. Give yourself enough leeway so that you can feel calm and collected and make good decisions. We want to be making smart decisions about the future, not about the past.

If you have it, feel free to take money out of your Safety Net, that’s what it’s there for. You could either put it into your Cash Reserve account, which is FDIC insured, and will have a 1-2 day transfer time, or you can put it directly into your checking account. Whatever is going to make you feel comfortable and able to sleep at night, and start thinking about the next 1 or 2 years rather than the next 1 or 2 months.

There are going to be other expenditures in there, do feel free to take out a little bit extra. I’m probably looking at spending more on things like childcare. So, do please have enough on hand so that you can be comfortable.

Number two. What you can do as part of society.

I think it’s important to remember that we’re all in this together. Some of us are liver cells, some of us are heart cells, but we have to all be working together to get out of this. If you can, if—like me—you’re a salaried employee who has money coming in and can work from home relatively easily, I think it’s part of our responsibility to find ways to keep putting money back into our local community.

So, things I’ve been doing: I’ve been buying gift cards to local restaurants and cafes, I’ve kept my dog walker and my babysitter employed and money flowing to them…if you can do that, if you can continue to help other people in your community have money coming in, that will go a long way. We might all need to button down a little bit, but we should make sure we are still helping others in our community get by.

Think of lots of things like that, I think some places you can still do takeout and delivery. Keep those restaurants and other things in business as long as possible. The more that we can put money back into the community, if we’re able to, the better the community is going to get out of this.

Finally, the last thing I want to talk about is something you might not be thinking about, which is the advantages that you as an individual investor have over the professionals. So professionals, as the word says, this is how they make their money. They need to make that money every quarter, every month, every year. They are under a lot of time pressure to do things now.

On the other hand, if you’re like me, you’re investing for another 20 or 30 years for retirement. Which means that a down market like this, while it’s definitely scary, is also one of the best buying opportunities we’ve had in about a decade.

So, some thoughts here. If you feel ok, if you have your emergency fund set up, look at things like funding not only your 2019 IRA, but also your 2020 IRA. Take advantage of these prices while you can.

You can also look at accelerating your 401(k) payments. If you have a 401(k) match, you might actually get more money in now—to be clear, this varies very much by 401(k) plan—but do think about where in your retirement accounts you can be putting money to work today at much lower prices.

I just want to say—I know this is scary. We’re going to get through this. And thank you very much for your time and patience.”

Betterment Cash Reserve

†Betterment Cash Reserve (“Cash Reserve”) is offered by Betterment LLC. Clients of Betterment LLC participate in Cash Reserve through their brokerage account held at Betterment Securities. Neither Betterment LLC nor any of its affiliates is a bank. Through Cash Reserve, clients’ funds are deposited into one or more banks (“Program Banks“) where the funds earn a variable interest rate and are eligible for FDIC insurance. Cash Reserve provides Betterment clients with the opportunity to earn interest on cash intended to purchase securities through Betterment LLC and Betterment Securities. Cash Reserve should not be viewed as a long-term investment option.

Funds held in your brokerage accounts are not FDIC‐insured but are protected by SIPC. Funds in transit to or from Program Banks are generally not FDIC‐insured but are protected by SIPC, except when those funds are held in a sweep account following a deposit or prior to a withdrawal, at which time funds are eligible for FDIC insurance but are not protected by SIPC. See Betterment Client Agreements for further details. Funds deposited into Cash Reserve are eligible for up to $1,000,000.00 (or $2,000,000.00 for joint accounts) of FDIC insurance once the funds reach one or more Program Banks (up to $250,000 for each insurable capacity—e.g., individual or joint—at up to four Program Banks). Even if there are more than four Program Banks, clients will not necessarily have deposits allocated in a manner that will provide FDIC insurance above $1,000,000.00 (or $2,000,000.00 for joint accounts). The FDIC calculates the insurance limits based on all accounts held in the same insurable capacity at a bank, not just cash in Cash Reserve. If clients elect to exclude one or more Program Banks from receiving deposits the amount of FDIC insurance available through Cash Reserve may be lower. Clients are responsible for monitoring their total assets at each Program Bank, including existing deposits held at Program Banks outside of Cash Reserve, to ensure FDIC insurance limits are not exceeded, which could result in some funds being uninsured. For more information on FDIC insurance please visit www.FDIC.gov. Deposits held in Program Banks are not protected by SIPC. For more information see the full terms and conditions and Betterment LLC’s Form ADV Part II.

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