1. Don’t panic
As the share market plummets, many people are worried about what this means for their reduced retirement savings. But now isn’t the time to make major changes to your super fund.
“Firstly, if you have 30 years or more before retirement, you can wait this out and come out the other end just fine,” says eToro Popular Investor Joe Milazzo. “If you’re closer to retirement, hopefully you’ve made some wise financial decisions this close to your ‘tools down’ day.” While Milazzo says “there’s nothing wrong with closing out your trades and sitting on the sidelines for a while,” he also points out “as interest rates are so low and probably continuing to drop, there’s not much incentive.”
By selling now, you’ll lock out your losses, miss out on the eventual upswing and also have to pay capital gains tax. Having this sort of cash just sitting in the bank simply means inflation will rise faster than your money earns in interest. “Turn off your computer and log out of your trading applications,” advises Milazzo. “Out of sight out of mind can help sometimes.”
2. Bide your time
When everyone else is selling, it’s worth considering buying shares. “In short, bad news is an investor’s best friend,” Warren Buffet says. “It lets you buy a slice of…future at a marked-down price.” Look at options such as treasury bonds, advises Milazzo. “These government bonds normally act in the opposite direction of the market. The market goes down, bonds go up! Not always but they are less risky than others.”
3. Be generous
Many small businesses will go under during the COVID-19 pandemic. So, if you’re in a financial position to do so, and you’re owed a refund of $50 or less from an event you couldn’t attend due to it being cancelled, then don’t ask for a refund. Keeping small businesses afloat will keep the economy buoyant, and benefit everyone in the long run.
4. Build a buffer
If you’re reaching retirement age, it’s a good idea to build up a cash buffer of around three years’ worth of living expenses. This means you can weather any bumps or crashes in the market without having to sell investments.
5. Look outside the stock market
“There are many other income-generating streams out there besides the stock market,” says Milazzo. “Is it worth moving your money? Every trader has different risk tolerances and time horizons.” While many people aren’t in a financial position to be buying a house, if your job is secure and you have the funds, this is your time to bargain hard – both with the vendor and the bank. Not only could you get a reduced rate on a house, but the bank may give you a lower mortgage rate too, meaning you’ll be ahead of the game when the economy starts to pick up.
6. Short your trades
“Certain brokers allow you to short markets,” says Milazzo. “You’re essentially saying, stock X will go down. The more it goes down, the more you profit. But please take heed – traders like to use leverage and can quickly wipe out your account if you are not paying attention. For example, the eToro platform gives you the option to short a stock with no leverage or X11. This action would be for more advanced and committed traders.”
7. Know your entitlements
The Australian government has released an $83.6billion coronavirus stimulus package, designed to help small businesses, sole traders and the self-employed, as well as pensioners, students and those on income support. If coronavirus has affected you, you’re also able to access up to $10,000 of your super before 1 July, and another $10,000 after July. Knowing what you’re entitled to could make the difference between keeping your business afloat or managing your daily expenses more easily.
8. Ask for help
Many banks and utility companies offer repayment relief, deferred payment or payment plans during global financial crises. Financial Counselling Australia offers a helpline where you can get free, independent financial advice. Don’t be afraid to ask for help when you need it, in order to survive.