Pandemic stock downturn hits people in their 401ks

LACONIA — Some people think they can time the stock market, buying stocks after prices have fallen and riding a positive wave as values increase.

Most financial advisers will tell you that is easier said than done, and some investors are now finding this out the hard way.

Tuesday marked the end of Wall Street’s worst quarter since 2008.

The issue is far from academic for many retired people throughout the Lakes Region and elsewhere who have seen rapid declines in their 401k plans and other investments built over a lifetime.

Dave Kutcher, founder and president of DAK Financial Group in Laconia, said his clients with fixed index annuities have fared well. These investment vehicles are backed by insurance companies and are not subject to the risk of stocks.

Older retirees, of which this state and region have many, can be particularly vulnerable to investment declines. They have less time to wait for a financial recovery and may depend on investment income.

“We’ve had a lot of people thank us for not losing their money,” Kutcher said.

Meanwhile, some people involved with stocks have taken a beating.

Kutcher spoke to a man recently who said he tried to time the stock market, essentially gambling that it would increase after an initial big drop.

“He told me, ‘I think I made a huge mistake. I thought it was all the way down and I bought back into it. I wish I had waited longer,’” Kutcher said.

Warren Buffet, chairman and chief executive officer of Berkshire Hathaway and one of the most successful investors in the world, has a famous quote about the difficulty of timing the market:

“I have no idea on timing. It’s easier to tell what will happen than when it will happen.”

That leaves many investors, particularly those with mutual funds based on stock performance, wondering what to do now.

The Standard & Poor 500 is down about 18 percent for the first three months of the year amid the economic downturn associated with the coronavirus pandemic.That performance would have been much worse if not for a rally after Congress approved a $2.2 trillion economic rescue plan.

Benjamin Wilson, a financial adviser for Edward Jones Investments in Laconia, said that while this pandemic wasn’t expected, many people were prepared for a market downturn.

“I would say we went into this marketplace expecting higher volatility not from coronavirus, but from the later stages of the biggest bull market,” he said. “As a firm we try to strike a balance between high quality investments and diversification.”

Many portfolios combine stock investments, which are riskier, with bonds, which have lower risk.

“There has been some panic, but for the most part, our clients have felt well prepared and for the most part have stayed the course,” Wilson said. “Long-term, most won’t be impacted by the market sell-off.

“The biggest threat to people has been their emotions. There was a temptation a couple weeks ago to get into panic. This pullback won’t last forever. We want to make sure when the rebound happens, it takes us back to where the portfolio was and beyond. The people who panic and jump out part of the way through won’t recover.

“We’re on a roller coaster ride right now and you wouldn’t want to get off a roller coaster halfway through the ride.”

He also quoted a famous Buffet line:

“The stock market is a device for transferring money from the impatient to the patient.”

Joseph Davis, chief economist for Vanguard, expects a rebound later this year and early next year.

“The last global recession, the global financial crisis of 2008 and 2009, was deep and long,” he said on the firm’s website. “We don’t view our latest challenge in the same light.

“The global financial crisis was a house of cards falling down, a crisis of excessive leverage, with the financial system itself in jeopardy. The system is sounder now.”