Financial Emergency Kit

Bryan S. of Wilmington, DE asks: [I’m starting to feel like with this trade war and the possibility of real wars around the world such as with North Korea or Syria that the outlook isn’t so rosy. What do you think and what suggestions do you have for playing defense?] Mitch’s Response: It’s totally natural to feel the way you do, Bryan, and I appreciate your writing and sharing your sentiments. I’m sure a lot of other readers feel the same way. Both of the negatives you mentioned – trade war and real war – have real potential to derail the bull market and economic expansion, in my view. The question is, will either outcome actually come to fruition? It is anyone’s guess, but based on what we know, we would say the probability is quite low. On the tariff front, both China and the U.S. are already posturing to avoid a full-on trade war. President Trump’s top economic adviser, Larry Kudlow, and U.S. Commerce Secretary Wilbur Ross have both indicated an openness to talks to resolve the trade dispute before it escalates out of control. Each time Kudlow or Ross make those kinds of remarks, markets seem to respond favorably. China also does not appear interested in upping the stakes – every tariff threat they have made has been proportional to the U.S.’s threats, and they have indicated that tariffs will not go into effect if the U.S. backs away. President Trump has a history of making a big threat or promise as a starting point, then using that as a tool to negotiate or walk back to a resolution. I think that’s what we’ll see happen here. Real war is a wildcard, but again I think we have a situation where both sides want to convey a strong aggressor mentality, with a real goal of establishing some peaceful compromise. At any rate, I believe it is possible to make those kinds of investment decisions in real time. In my opinion, there is little use for using the worst-case scenario as your base case for making investment decisions. Doing so increases the likelihood that you could potentially miss out on more bull market in the meantime. That all being said, there are a few useful tips I can offer you for “playing defense” as you aptly put it. For just about every investor, I think there are a few items you should almost always have in your ‘financial emergency kit.” Here they are: 1. One years’ worth of cash reserves – How much money do you and/or your household spend a month? Multiply that number by 12, and set aside that much in cash in a separate savings or checking account. You never know what curveballs life may throw at you, so it makes good sense in my opinion to have cash available to deal with the unknowns. 2. Store important documents securely – it can really give you peace of mind if all of your important financial documents (tax records, wills, trusts, mortgage documents, insurance papers, IDs, etc…) are stored in a safe place and organized together. Don’t have these be the only copies of these documents, either. Have another set stored somewhere else. 3. A Financial Advisor you trust – the benefit of having a strong relationship with someone you trust is pretty invaluable. Not only can your advisor keep you up-to-speed on latest developments in the market, he or she can also help you make sure your focus stays on your long-term objectives. Tariffs and trade wars and the possibility of real wars are all nearer-term concerns that might evaporate in a few months’ time. But your investment objectives and needs likely span the next 20, 30, or even 40 years. Investors’ biggest mistakes oftentimes are losing sight of the long-term because of something that concerns them in the short-term. We believe that an advisor, like our team here at Zacks Investment Management, can help avoid that trap. 4. Know Your Net Worth - No matter if it is a financial emergency or a calm market, knowing your net worth is important to your financial well-being. Calculating your net worth can give you a better idea of where you stand in terms of your long-term investment goals and give you a strong footing to make investment decisions. If you do not currently know your net worth, then there is no better time to calculate it than now. To help you understand how to measure you net worth, download our guide Measuring Your Net Worth. Simply click on the link below to get your copy today!1 --------------------------------------------------------------- ABOUT ZACKS INVESTMENT MANAGEMENT If you want some ideas on just how to position your portfolios accordingly, reach out to us here at Zacks Investment Management and we’ll show you how. 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