Decision making in the face of uncertainty

Decision making in the face of uncertainty

When markets rise or fall ten percent in a day and your account values oscillate by thousands of dollars along with those shifts, it is easy to become concerned about short term market behavior. Concern would be a perfectly normal reaction. However, what you do with your concern determines how you fare not just now but in the future. If that concern becomes an overwhelming need to not see lower portfolio values on coming statements, you can easily be swayed into making a short-term bet on the market and sell stocks to preserve assets.

No one knows when we will get past Covid-19, but given the massive amount of resources, attention, and effort being put forward to defeat the virus, it is hard to imagine it is anything other than a matter of time before this weird world we are living in now looks more normal. Financial markets may get worse in the next few months, but it is also true markets often recover before other things improve. How can we make a good choice in light of all this uncertainty?

Framing decision-making around a short-term prediction about what will happen in the markets and trading based on those predictions is a low probability and high stress approach to markets. Instead, consider what you will think when this is all in the past, whether that is in a few months or longer.

Imagine it is the spring of 2025… Looking back on 2020, you had three choices with respect to your investments after they dropped in the “Coronacrash:” buy more stocks, hold the stocks you had, or sell stocks. What choice do you think you will have wanted to make?

Imagine it is the spring of 2025. We have all been eating in restaurants, going on trips, and attending concerts, sporting events, and worship services. Looking back on 2020, you had three choices with respect to your investments after they dropped in the “Coronacrash:” buy more stocks, hold the stocks you had, or sell stocks. What choice do you think you will have wanted to make?

Through all past downturns, those who held on or bought some stocks (as we do when we rebalance) were happy with their choice. Those who sold stocks saw mixed results. Those who sold at or after the market bottom suffered losses which permanently damaged their portfolios. The only sellers that would be happy were the few who sold before the market bottomed, and IF they bought again at a price lower than the time of sale, and IF they didn’t get scared out of the stock market in the future. That’s a pretty iffy approach given many of these sellers were panicked.

Wall Street SignThe last big downturn happened in 2008/2009. The economic damage lasted for many years after the market decline. The below illustration from Vanguard funds shows what happened to a seller who sidestepped the aftermath of the Lehman Brothers bankruptcy but didn’t buy back in.[i]

Note the small window of time in which the seller could have bought at prices low enough to make a difference. Since news at the time was extraordinarily negative, it would have been hard for someone frightened about the conditions to buy then.

Also note how relatively quickly the balanced portfolio (red line) passed the results for going to cash (green line) or an all-bond portfolio (blue line). Switching entirely to bonds was not easy either. For the entire period shown, the narrative was that defaults would rise because of the bad economy and interest rates had to rise so bonds were therefore risky. We’ve always avoided bonds which had a meaningful probability of default or would suffer greatly from interest rate increases.

Vanguard Bail and Stay Out Graph

This time is different. Every past downturn was different too. Yet the decisions to be made are the same. Holding or buying worked best. Selling was risky. We are confident when we look back on this, you will be very happy that we were steadfast in our advice to act like investors, not speculators and to stay diversified, patient, and disciplined.

Coronavirus Aid, Relief, and Economic Security (CARES) Act

The stimulus measures passed, dubbed the CARES Act, has many aspects. The four impacting our clients the most are the stimulus checks, the waiving of Required Minimum Distributions from retirement accounts, relief for small businesses, and penalty relief for Covid-affected persons under age 59 ½ withdrawing from a retirement account.

Eligibility for stimulus checks is based on your tax returns. If your 2018 adjusted gross income (AGI) was high, defined here as over $75,000 for a single filer or $150,000 for joint filers, but your 2019 will be near or below those amounts, you may want to file your taxes as soon as possible.

calculatorIf your 2018 AGI was below $75,000 for a single filer or $150,000 for joint filers but your 2019 will be near or above these amounts, you may want to delay filing your taxes. The April 15 deadline has been extended until July 15.

Required Minimum Distributions (RMDs) that would have been taken in 2020 are no longer required. If you have already taken distributions from retirement accounts, there is some ability to return funds and avoid the taxes which come with such distributions.

Small businesses have a variety of resources to help them weather the crisis, from forgivable loans to payroll tax breaks. The details are beyond the scope of this forum.

If a taxpayer is under 59 ½, the customary 10% penalty for retirement plan and IRA distributions is waived if the taxpayer qualifies as affected by Covid-19.

Our team is available to help you sort through your options.

Beware of Covid-19 scams

Times of crisis and rapid change can bring out the best in people as we have seen with the world banding together in many ways to stifle Covid-19. Unfortunately, times like these also bring out the scam artists. Scammers may promise high paying work from home opportunities, bogus treatments, vaccines, toilet paper and sanitizing products. The government will not request payment, nor will anyone reach out requesting personally sensitive health or financial information.

The government will not request payment, nor will anyone reach out requesting personally sensitive health or financial information. Fake stimulus checks are already appearing in mailboxes.

Fake stimulus checks are already appearing in mailboxes. Watch for letters or emails claiming to be from the Centers for Disease Control and Prevention (CDC) or experts claiming to have inside information on the virus. Do your homework prior to donating to charities or crowdfunding sites. Be suspicious of urgent demands and emergency requests. Do not click on links or open attachments from sources you do not know. Obtain your news from a trusted source. If it sounds too good to be true, it likely is.

News & Notes

Dan Moisand, Fee-Only Financial Advisor with Moisand Fitzgerald TamayoCongratulations, Dan Moisand: The Financial Planning Association® (FPA®) has named Dan Moisand, CFP® as the new practitioner editor of the award-winning, peer-reviewed Journal of Financial Planning, effective Mar. 13, 2020. Since 1979, the monthly Journal of Financial Planning focuses on expanding the body of knowledge in the financial planning profession. Dan, a former Journal columnist (2008-2015) and the only two-time winner of the Journal of Financial Planning’s Call for Papers competition, will provide input and guidance to the Journal staff to ensure published content is relevant and valuable for financial planning practitioners.

“Dan’s long and distinguished record of achievement and leadership, coupled with his passion for advancing the profession, will help FPA continue to deliver innovative and thought-provoking content for one of the most respected publications in the financial planning profession,” said FPA Executive Director/CEO Lauren M. Schadle, CAE. “As practitioner editor of the Journal, Dan will bring new perspectives that will inspire, excite and empower practitioners to drive their personal and professional development forward.”

MFT named to “Seminole 100” for third time: Our firm was named to the Seminole 100, a program run by the Jim Moran Institute for Global Entrepreneurship at FSU’s College of Business, which recognizes the 100 fastest-growing privately held businesses owned or co-owned by a graduate of Florida State University. FSU alum Dan Moisand accepted on behalf of the firm at a banquet in March. MFT has received this recognition all three years since the program began.

It is encouraging to be recognized for a strong growth rate because our “marketing” is almost purely word of mouth. So, thank you! This listing validates our long-held belief that the best way to build the firm is to do great work for our existing clients. As personal finances get ever more complex, our ability to simplify and coordinate a clients’ financial affairs becomes increasingly important and valuable.

Need a diversion? While we are all cooped up a bit and trying to avoid getting too stir crazy, we saw this compilation of 100 fun things to do at home. It includes virtual tours of some of the worlds greatest museums, new meals and cocktails to try, live-streams from NASA, and even virtual rides from Disney.

Form ADV and Privacy Policy: You should have received a copy of page 2 of our 2020 firm disclosure brochure ADV Part 2A. We must provide this summary of any material changes and a copy of our firm’s Privacy Policy at least annually. At any time if you would like a full copy of our disclosure brochure, contact Sara Nash at ext. 114 or email her at [email protected]/.

[i] Sources: Vanguard calculations, using data from FactSet. All data as of June 28, 2019.

Notes: This is a hypothetical illustration. Balanced portfolio is represented by 60% S&P 500 Index and 40% Bloomberg Barclays U.S. Aggregate Bond Index; bonds are represented by Bloomberg Barclays U.S. Aggregate Bond Index; and cash is represented by Bloomberg Barclays U.S. 3-Month Treasury Bellwether Index. Past performance is no guarantee of future results. The performance of an index is not an exact representation of any particular investment, as you cannot invest directly in an index.

 Contact Us

Moisand Fitzgerald Tamayo, LLC is an Orlando, Tampa and Melbourne, Florida based fee-only financial planner serving central Florida and clients across the country. Moisand Fitzgerald Tamayo, LLC specializes in providing objective financial planning, retirement planning, and investment management to help clients build, manage, grow, and protect their assets through all phases of one’s life and the many transitions in between. If you have any questions or would like to discuss anything further, please give us a call or send us a note. If you are not a client and wish to receive emails notifying you of new posts – no more than once per month – fill out the subscription information in the sidebar to the right. For more frequent updates, follow us on FacebookLinkedIn, or Twitter.  

Important Additional Information & Disclosures

Please remember that past performance may not be indicative of future results.  Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Moisand Fitzgerald Tamayo, LLC-“MFT”), or any non-investment related content, made reference to directly or indirectly in this blog will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. 

Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions.  Moreover, you should not assume that any discussion or information contained in this blog serves as the receipt of, or as a substitute for, personalized investment advice from MFT. 

Please remember that if you are a MFT client, it remains your responsibility to advise MFT, in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services, or if you would like to impose, add, or to modify any reasonable restrictions to our investment advisory services. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. MFT is neither a law firm nor a certified public accounting firm and no portion of the blog content should be construed as legal or accounting advice. Tax advice is given only to clients and only when agreed to by MFT. A copy of the MFT’s current written disclosure Brochure discussing our advisory services and fees is available for review upon request.

Please Note: MFT does not make any representations or warranties as to the accuracy, timeliness, suitability, completeness, or relevance of any information prepared by any unaffiliated third party, whether linked to MFT’s web site or blog or incorporated herein, and takes no responsibility for any such content. All such information is provided solely for convenience purposes only and all users thereof should be guided accordingly.

Please Note: Limitations:  While MFT does NOT pay for recognition, awards, or publicity, neither rankings and/or recognition by unaffiliated rating services, publications, or other organizations, nor the achievement of any designation or certification, should be construed by a client or prospective client as a guarantee that he/she will experience a certain level of results if MFT is engaged, or continues to be engaged, to provide investment advisory services. Rankings published by magazines, and others, generally base their selections exclusively on information prepared and/or submitted by the recognized adviser. Rankings are generally limited to participating advisers. No ranking or recognition should be construed as a current or past endorsement of MFT by any of its clients.  ANY QUESTIONS: MFT’s Chief Compliance Officer remains available to address any questions regarding rankings and/or recognitions, including providing the criteria used for any reflected ranking.

Historical performance results for investment indices, benchmarks, and/or categories have been provided for general informational/comparison purposes only, and generally do not reflect the deduction of transaction and/or custodial charges, the deduction of an investment management fee, nor the impact of taxes, the incurrence of which would have the effect of decreasing historical performance results.  It should not be assumed that your MFT account holdings correspond directly to any comparative indices or categories. Please Also Note: (1) performance results do not reflect the impact of taxes; (2) comparative benchmarks/indices may be more or less volatile than your MFT accounts; and, (3) a description of each comparative benchmark/index is available upon request.


About Dan Moisand

Dan Moisand is a fee-only financial advisor with Moisand Fitzgerald Tamayo, LLC. He is a regular contributor for multiple outlets, including Florida Today, MarketWatch, and The Wall Street Journal. His writing and financial advice have also been featured in Financial Planning, Investment Advisor, Wealth Manager/Advising Boomers, Forbes, Smart Money, and The New York Times, among other publications. He is the only two-time winner of the Journal of Financial Planning’s “Call for Papers” competition and has been named a top financial planner and advisor by multiple publications. Investment News named Dan one of the “twenty most influential men and women” in the history of financial planning. He currently serves on the Board of Directors for the CFP (Certified Financial Planner) Board.


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