by | Jul 29, 2022 | Portfolio Management

Suffice it to say, in the age of COVID-19 we’ve collectively witnessed a seismic shift in how our world functions. Around the globe, the far-reaching economic and societal ramifications of the pandemic have been profound and lasting.

But as the adage goes, this too shall pass. Fortunately, there are investment decisions you can make to transition through the pandemic economy, and the potential recession ahead, with greater ease. In this article, we’ll share strategic advice from 7 investment experts for managing one’s portfolio in a post-pandemic world.

Invest in a Broad Index Fund

Keep It Simple, Stupid — For the vast majority of investors, the KISS mantra — Keep It Simple, Stupid — should guide their investment philosophy. Too many people believe that active trading is necessary to successfully build wealth. They watch the financial news networks and believe that they can beat the market by active trading. 

The best strategy for most investors is to simply invest in a broad index fund that tracks the performance of the market. But don’t take my word for it. Listen to Warren Buffett who said that for building retirement savings, consistently buy an S&P 500 low-cost index fund. I think it’s the thing that makes the most sense practically all of the time. In his 2014 letter to Berkshire Hathaway shareholders, Mr. Buffett said that when he passes away, the instructions for the trustee for his wife will be as follows: My advice to the trustee could not be more simple: Put 10% of the cash in short-term government bonds and 90% in a very low-cost S&P 500 index fund. (I suggest Vanguard’s.) I believe the trust’s long-term results from this policy will be superior to those attained by most investors. 

Exchange Traded Funds and Exchange Traded Notes that track broad market indexes such as the S&P 500 index or the Dow Jones Industrial Average are wholly appropriate for most investors.”

Robert R. Johnson, PhD, CFA, CAIA, Professor of Finance, Heider College of Business, Creighton University

The Qualified Business Income Deduction

“Utilize IRS Code 199A–the Qualified Business Income Deduction. It is meant primarily for those that can attain the very low-hanging fruit of real estate professional status. How low is it? You do not even have to be a realtor. So long as you meet the 11-part checklist, the first 20% of your income becomes tax-EXCLUDED. That means you only pay federal taxes on the remaining 80%! A real estate professional is considered a person who performs real estate management services. This is not meant for house flippers. Typically, such folks follow what is called the BRRRR method, which means Buy, Remodel, Rent, Refinance, and Repeat. Why is this good for retirement? Because only people with excess time on their hands and those

with a working knowledge of their community and experience working with the public are capable of actually performing these services. People in retirement must think about earning extra income in order to sustain their standard of living for 34 years – about the age of retirement to when they pass on. Keep in mind that for every six months one postpones retirement, their retirement nest egg extends by about six years.”

Brad Biren, Esq., LL.M., Juris Doctor & Master of Law in Taxation

Invest the Majority of Your Money in Low-Risk Securities

“Safeguard Income Streams – Many people, not only those in retirement, faced threats to their income sources as a result of the pandemic. Jobs ceased to exist, rental houses became vacant, and other investments that had previously provided safe havens were no longer accessible. During this time, there were also concerns about the security of investment income. In the retirement years, protecting income streams remains a top priority, specifically when it comes to investment earnings. It could be time to think about integrating a few passive sources of income to the revenue streams if you see that your current income streams are in danger.

Post-Epidemic Purchasing Patterns – The pandemic affected many people’s purchasing habits. The lockdown made plans for trips, flights, and dining difficult. People discovered that when these frills were unavailable, saving was considerably simpler. Unfortunately, a lot of people have an inflated idea of what it takes to survive in retirement. It’s time to adjust your budget to accommodate for travel and most of these extras that are now back. New retirees must take extra care to avoid underestimating their budget by failing to account for entertainment and other expenses that are once again playing a significant role in daily life.

Buying Stocks During A Bear Market – When trying to build wealth prior to retirement, investment in an up market is different than investing after you start taking money out. In addition, a lot of equities have fallen in the post-pandemic globe. The falling market allows you to benefit from some great offers while you are collecting shares. You could have to sell the shares at a loss when taking money out of your retirement account. If you are post-retirement & should extract your savings, your best option is to invest the majority of your money in low-risk securities.”

Matthew Dailly, Managing Director, Tiger Financial

A Fixed Indexed Annuity (FIA) for a Portion of Assets

“The markets are down, the economy is diminishing – People are worried to say the least. This pushes them to seek security and stability in this season of unknowns and worries. Many investors are seeking safety and are looking at reducing the risk in their portfolios by having more cash and bonds. The funny thing is there is a better-than-bonds alternative many people do not know about. The right version of this product will allow you to capture a return greater than bonds without any risk of losing your money to a falling stock market. Most people think that sounds way to good to be true.

Most of my clients are interested in a Fixed Indexed Annuity (FIA) for a portion of their assets. In a normal retirement portfolio, you should have 60% in stocks and 40% in bonds/cash! If you could get a product that performs better than bonds, then you would be wise to look at putting a portion of that 40% in a FIA.

In general, a Fixed Indexed Annuity tracks an index like the S&P 500 and gives you credits based upon the performance of the index. It is not directly invested in the index which allows the issuer to guarantee no losses for you. The best indexes offer you the ability to have a participation rate from the index. So for instance, if you were tracking the S&P 500 your participation rate might be 60%. What this means for you is if the S&P 500 returns 10% for the year then you get 6%.

For most of my clients, this is appealing because it gives them much more upside potential than most other products like it, and again no risk on the downside. Additionally, with the right carrier/product there is no fee.

Of course, there are two main catches, the first we talked about already and that is limited gains related to other investments. The second is time and surrender costs, at a minimum the money needs to be put away for 5 years to avoid a surrender charge. I would not pick a product that has a surrender charge higher than 10 years. Some FIA allows partial access before the end of the 5 years, and how much/when depends on the company/product. If you have 5 years to spare before needing the money it can be a great play.

The last point, picking the proper company is a huge deal in today’s annuity market. We are seeing the beginnings of probes into some funny business on the balance sheets of annuity companies. From the data I have seen, some companies have a 1.3% buffer between themselves and insolvency. These aren’t traditionally bad companies many are A+ rated.”

Hunter Guthrie, Coho Financial Group

Bonds, Real Estate, and Infrastructure

“If a client has multiple retirement accounts that they are looking to consolidate – they should do so slowly to minimize the amount of funds that are out of the market one at a time. If someone is only looking to rollover one retirement plan, it may make sense to hold off until market volatility has settled down.

Often retirement savers are years away from when they will actually need their money. Keep in mind that wealth building takes time and volatility is the price an investor must pay for future appreciation.

If you are concerned about market volatility, consider incorporating more bonds into your overall asset allocation to minimize the swings in your account balances. Also, consider adding in additional asset classes such as real estate and infrastructure which tend to move differently than traditional stock expenses. 

We see clients processing 401K rollovers when the market has fallen drastically. When you rollover your 401K, the securities are sold and no longer invested – so you can potentially miss out on any market recovery (appreciation). Rollovers typically take anywhere from 7-10 business days, so that’s a long time to be out of the market.”

Jim Marquez, Certified Financial Planner, Capstone Financial Advisors

Maximum Contribution to a 401K and Open a Health Savings Account (HSA)

“Contribute the Maximum to a 401(k) – If your business has a retirement plan, you should participate in it and make the maximum contribution you are able to, up to the company match, if there is one. You may contribute up to $20,500 in a 401(k) plan for 2022. Additionally, if you’re 50 or older, you can contribute an additional $6,500 catch-up amount for a total of $27,000. Your retirement assets also increase tax-free, in contrast to straightforward brokerage accounts. Additionally, you contribute to these accounts immediately from your paycheck before the IRS deducts its share. Therefore, making 401(k) contributions effectively lowers your taxable income. Additionally, a number of businesses that provide 401(k)s also offer a Roth 401(k) option. While making contributions to these plans won’t lower your taxable income, if your account has been open for at least five years, you can start making tax-free withdrawals once you turn 59.5.

Open a Health Savings Account (HSA) – Your retirement income, which you worked so hard to achieve, will likely be significantly reduced when you retire due to healthcare costs. In fact, according to a recent Fidelity research, a 65-year-old couple may anticipate spending $260,000 on healthcare costs. You should therefore get ready for that. Opening a health savings account is one method to start preparing to reduce future medical expenses (HSA). These can be compared to 401(k)s for medical bills. You may deduct your donations from your taxes.”

And your income increases tax-free. The best part is that you can withdraw money tax-free as long as you use it for eligible medical costs.”

Raphael Gauthier, CEO, Play To Earn Diary

Buy Gold and Delay Social Security Benefits

“Top 5 retirement investment strategies in a post-pandemic world.

Avoid cash savings – First, avoid holding large amounts of cash because inflation reduces the value of money. Therefore, don’t keep a lot of cash on hand. Instead, consider allocating a sizeable chunk to long-term investments, which have a higher chance of preserving your purchasing power over the long run.

Buy Gold – Gold is the ultimate secure investment, and it may help you diversify away from dollar-denominated assets and would not lose value even in times of inflation.

Delay Social Security Benefit – You can delay the start of your Social Security payments if you’re close to retirement age and concerned about how inflation may affect your retirement. The benefits can be started whenever you are between the ages of 62 and 70, but they get bigger the longer you wait until you turn 70.

Healthcare Savings – It would be best if you also gave priority to your healthcare savings. If the inflation is too high, your pre-estimated saving might not be enough, so add some money for the health care saving for your retirement.

Inflation-free Bonds – As you approach retirement age, you’ll probably start to skew your portfolio more toward fixed-income investments. Inflation-protected bonds, such as Treasury Inflation-Protected Securities, or TIPS, can be used to hold a portion of that fixed-income allocation.”

Emilia Flores, Financial Advisor & Co-Founder, UKBadCreditLoans

Uncertain Times Call for Portfolio Protection

With inflation at its highest levels in decades, and a global recession ostensibly looming over our shoulders, these are exceedingly uncertain times. Yet, adaptation is the hallmark of humanity. One’s retirement investment strategy must pivot with the economic reality. One fail-safe component of any retirement strategy is having a self-directed IRA. These types of retirement vehicles provide exposure to a myriad of alternative assets such as precious metals. To learn more about the space, here are our reviews for Precious Metals IRAs. Furthermore, have a look at our reviews for the top annuity companies to gain a better understanding of your investment options. 

Sarah Bauder

Sarah Bauder is a financial writer with over a decade of experience at numerous online publications, writing about alternative investments, retirement, US politics, world economy and more.