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Smart Money Moves

In an unstable financial climate, stay calm and listen to the experts

Inflation, rising interest rates and fears of a recession have many people worrying about their financial health. They may be watching their stocks, bonds and other investments plummeting and wondering if they should get out now and salvage what they can or stay in the market in hopes of recovering their assets and possibly increasing their wealth even more when the economy stabilizes.

Whatever the decision, it shouldn’t be made without the knowledgeable input and guidance of a Certified Financial Planner® and other experts in the field. This is what they do, and most have seen it all before and know how to handle it.

“When you use a professional, especially during times like this, you have a partner in making your decisions,” says Laura Raulinaitis, senior vice president and Certified Financial Planner® of The Lake Avenue Group at Morgan Stanley in Westlake Village, who has been in the industry for 25 years. “When you work with a professional who knows your needs, your goals, and your risk tolerance, and who knows you and is there for you to talk things through with, you won't make an emotional decision at the wrong time.”

Due to the pandemic, many individuals have been saying that this time is different, and this upheaval may not follow the same pattern as in the past.

“Just like the other years when it happened and everyone panicked and thought it would just keep going and getting worse and worse, it bounced back up again,” she says. “But the thing I've heard the most in my life during these downtimes is that ‘it's different this time.’ They look at a situation and say, ‘No, Laura, you don't understand because this time we have extra debt, or we just went through this recession, or look at everything going on with Russia, or I never lived through a pandemic before.’ Well, I haven't either, but other people have, and we still go on to make higher highs.”

Ted Fischer, an experienced Certified Financial Planner® and founder of Fischer Investment Strategies in Westlake Village, agrees.

“Inflation, recessions and inflationary times are pretty normal and people should understand this. These cycles happen, and yes, the pandemic really threw everything into turmoil. The reality is it's a big inflationary problem, but here's the good news—we'll get through it—it may just take some time.”

So, what are some strategies to make the most of your money through this difficult period without knowing how long it may last and how much worse it might get?

“Believe it or not, this is the time where if you can, if you can get yourself to fight human nature, to put more into your retirement account because you're buying more shares at cheaper prices,” says Laura. “The tough thing is that you're putting money away and you're seeing your funds go down, but focus on how many shares you're buying instead of what the value of those shares are during a pullback.”

Adds Ted, “I look at bear markets as buying opportunities because they don’t come along that often, maybe once every three to five years, but when they do come, it's a great opportunity to make a lot of money in the short term.”

The stocks he’s been selecting for his clients are mature, high dividend value stocks such as those in the financial, health care, and consumer staples sectors.

“They're attractive because they have a reliable dividend, which is substantially more than what people get in their so called ‘money market accounts’ or checking accounts or saving accounts at the bank.”

The recent increase in interest rates can also be used to your advantage.

“I have a saying: ‘Every dollar must earn its keep,’ and what that means is if the interest rate on one thing is higher than the interest rate on something else, then you want your dollars to earn their keep,” says Laura. “If you're saving and earning 2%, but you have credit card debt at 10%, then you're losing money. Instead of putting your money in a savings account, you need to pay down the credit card.”

Also, says Ted, pay close attention to recurring credit card charges, and think about canceling them, especially if you’re no longer using the services.

“Those membership fees, television subscriptions, music subscriptions and other things—people may have gotten really good deals on them, but they didn’t read the small print that says you just signed up for a five-year membership.” He also advises holding off on big purchases, like replacing your car, doing home improvements, and taking expensive vacations.

As for paying down your mortgage, Laura says that’s not always the best move.

“Even now, interest rates are very low on mortgages. I generally won't tell clients to pay down a mortgage because their money over a market cycle will grow more in a diversified portfolio than the money they’re saving by paying down their mortgage.”

Due to higher interest rates, Ted recommends moving away from traditional bonds, which are fixed income, to Treasury Inflation Protection Securities (TIPS).

“These are U.S. Treasury bonds and they correlate and increase in value with rising inflation, so that’s a good move.”

As in any other year, it’s important for every household to have a good-sized emergency fund.

“The rule of thumb is at least three to four months if both spouses are working and six months if only one spouse is working,” he says. “Some people are in specialized jobs too, and in that case, they might want to keep two years of living expenses accessible.”

In this volatile market, the bottom line is not to panic, stresses Ted.

“Depending on what the Federal Reserve does and how the stock market reacts, it may take a while for inflation to recede,” he says.  

Adds Laura, “We’re not in a death spiral. Give us a year or two and I think we'll be back making new highs and this will be a piece of our history that we'll be happy to forget.”

Certified Financial Planners® can offer a multitude of ways to protect and grow your money, but finding one you can trust and who you feel comfortable with is crucial. After all, this person is handling your hard-earned money and creating a path for your present and future financial health.

“If someone isn’t sure on how to go about finding someone they can trust, I think it's nice to look to people in your local area so that you can get together in person and build a relationship,” says Laura. “What you're looking for is someone that has taken on additional credentials in something that's important to you so you can feel more confident that you have a strong financial plan in place.”

She also encourages people to go to Broker Check at brokercheck.finra.org/.

“It's a public website and will tell you if that person has ever had anyone sue them for any type of wrongdoing. It also gives you their background so you can make sure that what they're saying they do and what they really do are the same.”

For help with handling your portfolio, you can contact Laura Raulinaitis directly at advisor.morganstanley.com/the-lake-avenue-group and Ted Fischer at fisfp.com/.

Laura Raulinaitis is a Financial Advisor with the Global Wealth Management Division of Morgan Stanley in Westlake Village, CA.  The information contained in this article is not a solicitation to purchase or sell investments. Any information presented is general in nature and not intended to provide individually tailored investment advice. The strategies and/or investments referenced may not be suitable for all investors as the appropriateness of a particular investment or strategy will depend on an investor's individual circumstances and objectives.  Investing involves risks and there is always the potential of losing money when you invest. The views expressed herein are those of the author and may not necessarily reflect the views of Morgan Stanley Smith Barney LLC, Member SIPC, or its affiliates.