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Thinking of Investing During the Market Downturn? Answer These 5 Questions First

Investing Retirement Funding

With the onset of COVID-19 in America, investors saw the 11-year run of our bull market come to an end on March 11, 2020. As we entered a bear market, the major indexes such as Dow Jones Industrial Average, NASDAQ and the S&P 500, experienced a more than 20 percent drop from their recent peaks in February 2020.

While many investors are panicking or just plain losing confidence in their investment portfolio's due to the recent market volatility, a select few find this to be an opportune time to pad their portfolio. If you’re in the latter group asking yourself "Is this a good time to invest?" Start by answering the questions below. Then, if you’re still interested, get in touch with your investment advisor to review your options. 

Why Invest During a Recession?

Choosing to invest during this pullback can make a lot of sense - prices on just about every asset class have fallen at a record pace. This means most investors can get bonds, stocks, real estate and more for a fraction of what those assets were worth just 2 months ago.

It's possible that those who were looking to cash out this quarter are in a difficult place due to the market drop. However, if you're  still years, or even decades, away from cashing out what’s in your portfolio, you can really benefit from this downturn in the market (this is often the case for young investors just starting to build and diversify their portfolio). They have the time needed to watch the market recover and their bargain-priced assets slowly regain their value.

#1: Is My Emergency Fund Fully Stocked?

The global pandemic had brought upon us great uncertainty in America, many people are preparing for job loss, medical bills, or even the sudden loss of a loved one. And as we continue to weather the storm both in the bear market and the real world, we are already seeing record numbers of Americans filing for unemployment.  It's still the early days of this crisis, but if we look back at the 2007-2009 recession, unemployment rose to five percent at the end of 2007 and up to nine and a half percent in June 2009. Unemployment actually didn't peak until  after the recession ended, at 10 percent in October 2009.

Even if you’re certain your job is secure and stable, it doesn’t mean you will not see some income fluctuation during this economic downturn. It’s entirely possible that you may need to care for a sick loved one. Depending on your job’s policy on leave, this could mean going for an extended period of time without a paycheck or having to quit your job altogether. 

You’ll find different people recommending different amounts, but I generally like to recommend six months of salary available in a savings account as an emergency fund. As you consider investing any additional dollars,  take a look at your savings first. You should feel comfortable with what you’ve already accrued and ready to live off of your savings if you had to. Once that’s taken care of, then you may be ready to focus on investments.

#2: Would It Be Better to Pay off My Debts?

In the fourth quarter of 2019, the New York Federal Reserve reported that American household debt rose to $14.15 trillion.3 While the majority of this debt covers things essential costs such as housing and auto loans, astonishingly there is $46 billion in credit card debt.3 If you find yourself in the position of choosing between paying down your debt or investing, there are plenty of factors to consider, and this would be something to consult with your financial advisor about. Working together, you may find that paying off debt will serve you better over increasing your investments. 

#3: Am I Rushing Into This?

While it feels like the market turned overnight, it’s important to remember that recessions and downturns tend to stick around for a while - "bottoming is a process." For instance, our last recession, lasted 18 months.4 What does this mean for an investor eager to jump in? It means you have time. You can speak with your financial advisor and discuss the pros and cons of investing during a market downturn. There’s no need to make a hasty, emotionally driven decision by tomorrow. While the markets will continue fluctuate, there is bound to be fits and starts on the road back, they’re not recovering overnight.

#4: Am I Emotionally Prepared to Watch My Money Drop?

If you choose to buy while the market is in a pullback, there’s a good possibility  that you will not buy at “rock bottom.” This means that you, as an investor, should be prepared for the ups and downs of your investments which will likely continue. While investments are always fluctuating, during an especially volatile period, it's a high probability that you’ll be watching your stocks rise and fall for months to come. 

Personal attachments to our money are real, and it’s important to consider the emotional toll that comes with watching your assets drop in value. If it’s unbearable to watch these fluctuations, then the potential gains may not be worth it. It’s important to express your concerns about this to your financial advisor before deciding to invest during a market pullback.

#5: Am I Still Following My Normal Investment Procedures?

Don’t treat the tempting prices and "buying opportunities" as a chance to forego your investment strategy or plan. Being blinded by the vision of untold riches in the future, this is a time in which you’ll want to be precise  about the next investment decisions you make. For example, your advisor may still want to invest in the strategies  you’re familiar with, not just those with the largest upside potential. 

As with all investments, you’ll want to speak with your advisor to be sure you’re maintaining diversity and monitoring for an appropriate amount of risk. Together, you can be sure that these changes in your portfolio are still reflective of your greater long-term financial goals.

As Americans, we are facing a future of uncertainty,  the global pandemic, economic instability  and a bear market. If you have the means to do so, investing now could prove to be a major benefit to your portfolio, but it is important to consider your decision carefully and thoroughly. Now more than ever, be sure to keep your advisor in the loop and consider your next financial decisions carefully as you navigate through these upcoming months.  

If putting more money to work during this market environment is something you want to do, click the button below to speak with one of our experts.          

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About the Author

James M. Comblo , CFF
is a Partner and the Chief Compliance Officer at FSC Wealth Advisors. His greatest passion in the financial services industry is helping clients accomplish their dreams both with investments and their personal lives. To learn more about him click here.


  1. https://www.economist.com/finance-and-economics/2020/03/14/entering-a-bear-market
  2. https://www.bls.gov/spotlight/2012/recession/pdf/recession_bls_spotlight.pdf
  3. https://www.newyorkfed.org/microeconomics/hhdc.html
  4. http://www.nber.org/cycles/