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MAKING CENTS: The Black Swan flies again

John Napolitano
CFP CPA
Smyrna/Clayton Sun-Times

According to Wikipedia, “The black swan theory or theory of black swan events is a metaphor that describes an event that comes as a surprise, has a major effect, and is often inappropriately rationalized after the fact with the benefit of hindsight.”

COVID-19 is a Black Swan. Like those that have come before this one, we will get through it. When, however, is anyone’s guess. Based on this unknown, here are a few ideas that may help you survive without sending yourself into a deep depression.

Focus on what you can control. You can control your time, your happiness and your attitude. Choose these days of confinement to look closely at your 168 hours per week and how you may like to rearrange them to increase your happiness and productivity.

Attitude is something you can control, as difficult as that may feel at this moment. Practice by thinking about the great things in your life and looking forward to more positive things when the dust settles. This little mind game can be another fun way to help shape a positive attitude.

You control most of the elements of your financial plan. Your living expenses, tax situation, estate plan, risk management plan, retirement plan, and entity structure(s). Use this time to pay attention and work on those other areas within your control that could use some help.

Hopefully you’re lucky enough to work with a good advisor who feels like I do about the importance of keeping your entire financial house in good order. You can begin this today as many good advisors have a comprehensive financial planning mentality and business continuity plans that did not shut down their work flow.

You can’t control markets or panic sellers, but you can control your own portfolio. We still believe that a well-constructed portfolio will stand the test of time and deliver positive returns. For those (likely do it yourselfers) who built portfolios consisting of indexes only or concentrated positions, thinking that you were the smartest investor on the planet over the past few years, welcome to reality.

Recognize the type of risk that you are taking, and going forward realize that risk mitigation has its place in portfolio management. Volatility has always been a part of investing. You can’t time volatility as there are two sides to the equation. First is when to get out, and second is when to get back in to risk assets; and people are making these decisions every day. For every sale of a security, there’s a buyer on the other side who sees opportunity.

A few tactics to consider now:

  • Rebalance your portfolio.
  • Consider loss harvesting with full knowledge of the wash sale rules.
  • Increase your 401K contributions to buy when markets are weak.
  • Make your 2019 retirement contributions sooner than the due date of the tax filing deadline. You can also fully fund your 2020 retirement accounts today.
  • Find an advisor who cares more about the entirety of your financial plan rather than just your portfolio or insurance.

John P. Napolitano CFP®, CPA is CEO of U.S. Wealth Management in Braintree, MA.  Visit JohnPNapolitano on LinkedIn or uswealthnapolitano.com

This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax advisor.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. John Napolitano is a registered principal with and securities offered through LPL Financial, Member FINRA/SIPC. Investment advice offered through US Financial Advisors, a Registered Investment Advisor. US Financial Advisors and US Wealth Management are separate entities from LPL Financial. He can be reached at 781-849-9200.