As the COVID-19 pandemic disrupts financial markets throughout the globe — significantly impacting the investment climate for folks who have skin in the game — El Paso Inc. spoke with four financial firms in El Paso for some guidance.
We spoke with Gary Borsch, chief executive of Professional Investment Council; Ruben Guerra, president and CEO of Guerra Investment Advisors; Miguel Gomez, a financial adviser at Lauterbach Financial Advisors; and top associates at Dodds Wealth Management Group of Raymond James.
Their responses were edited for clarity and brevity.
Q: The stock market continues to plummet, and more and more businesses are closing. What do you say to those who are worried about their investments?
Gary Borsch: We make decisions every day for our clients on what to buy, what to sell and how much cash to keep. But as to whether or not they should stay in the market even if it’s volatile? The answer is always yes.
We will continue to buy stocks for our clients, good quality stocks that pay dividends as the market is corrected even though it’s down right now.
We feel this is a buying opportunity. We may have not hit the bottom yet, but six or nine months from now, we’re going to look back and consider this time to be a good opportunity to be acquiring more stocks.
Dodds Wealth Management: It is always important that we remind our clients of their long-term investment strategies, long-term goals and the importance of their objectives. We had previously been harvesting gains in our portfolios, because we have had so many good years.
Clients understand that while these are long-term investments, at times it makes sense to become more conservative during difficult times in the market, but with an eye to future recovery.
Ruben Guerra: We’re dealing with a period of uncertainty, and we hope to see some stabilization in the markets soon. But with such a precipitous drop, if you sell at this point because you are afraid, you’re going to miss the opportunity when it rebounds. This is probably the wrong time to be selling out
Miguel Gomez: When we build plans with our clients, we incorporate the risk of a crisis such as this one, and it has been really helpful to have that built-in. So it really depends on how much risk a client is willing or even capable of taking, depending on their plan.
Another thing we do is remind clients who are worried that the market doesn’t always go up, it will eventually go down, then it will go back up.
Q: The Federal Reserve slashed its baseline interest rate to near 0% on Monday. Is this a good time for folks to refinance their mortgage?
Borsch: Anybody who is not taking advantage of the current interest rate environment is making a big mistake. There’s plenty of liquidity in the market, with extremely low rates, and they actually may be going a little bit lower. That is almost like free money.
I would encourage anybody who is interested in buying a house to do it today. Of course, I would not recommend anybody to be reckless about it or to borrow if they don’t need it.
Overall, yes, it makes sense to refinance. 15-year mortgages right now yielding 3% is extremely attractive just about any way you look at it.
Dodds: The short answer is: Everyone should be shopping their current mortgage rate. That includes looking at 15-year and 30-year mortgages.
Fixed mortgages seem to make more sense at this point, since you would be locking in a low, fixed rate for the life of the mortgage.
Guerra: Last week, 15-year fixed mortgages were at 2.79% and it dropped a little bit over the weekend when they were recalculating. I’ve never seen anything that low. I’ve been a homeowner for quite a number of years and when I bought my first house in 1976, the mortgage rate was at 7.8%. Compared to that, man, this is an absolute bargain.
Whether it be refinancing or putting a down payment to buy their first home, they’re going to be locking in some substantial rates, just really some incredibly good rates.
If they plan on staying there for a long time, just look at the difference between 2.7% and 7.7% and compound that over 30 years. You’ll be saving yourself hundreds of thousands of dollars.
Gomez: A lot of people are looking into refinancing, and what we’ve seen in the context of the banking industry is that they were swamped when people tried to do so at the same time. We’ve heard of some banks raising rates occasionally to try to decrease demand a little bit. If you’re able to refinance, I would say to shop and compare.
Make sure that it makes sense because you may get a lower rate, but the upfront costs may eat up a lot of that low rate. Understand how much loan refinancing is going to cost. Be sure that you make an apples-to-apples comparison of the rates and the payments, but also of the overall costs of the loan.
Q: For those who are nearing retirement, should they withdraw their retirement investments?
Borsch: We do not recommend that. Everybody’s case is a little bit different and you’d have to have a comfort level that you can feel good about and can sleep with at night.
There is nothing offered in the fixed income market or in the bond market right now, specifically in the savings area, that can come close to the historic returns.
Dodds: We can never stress enough how important it is that each investor be in a portfolio that matches their attitude towards risk and reward. Making large moves in either direction should not be taken lightly.
Guerra: You never want to totally pull out of the stock market, even if you’re a retiree. If you’re two or three years away from retiring, to totally pull out would be an invitation to live a substandard life.
Gomez: Someone that’s really close to retiring should be very careful about having a lot of allocation to the stock market and should be mindful of why that allocation is there in the first place.
I recommend they review their portfolio, make sure they understand the risks that they’re taking and remember that any risks they take will eventually come back up. But right now, nobody knows when exactly that will be.
Bryan Mena, who is pursuing a degree in political science from UTEP, is an intern at El Paso Inc. He can be reached at email@example.com.