The Serenity Prayer, Redux
Long-term clients & friends may remember this article which I wrote back during 2007-2009’s Great Recession. I‘m updating it this week in response to concerns related to the Corona virus.
Reinhold Niebuhr’s oft quoted Serenity Prayer asks for guidance in knowing the difference between the things that can be changed and those that can’t. At a time when mass layoffs, trillion-dollar rescue packages and a rising death count vie for the headlines, we can point to multiple situations which fall outside the abilities of mere mortals to affect. On the other hand, stepping back from those headlines might allow us to identify a few situations over which we still have some control.
During this period of falling stock, bond and real estate values, we hear people discussing safer, i.e. less volatile, investments. Unfortunately, the ideal time to have changed strategies and moved money to the sidelines was last year when all of those investments were more valuable, not today, when literally the entire world is on sale. We believe that reviewing the allocation of assets based on each individual situation is the most important investment-related decision most people make. Focusing on the long-term and trying not to be overly influenced by emotion are key elements in developing a consistent and successful long-term investment strategy. As with other purchases, the best time to buy is when prices are low. There are no guarantees in the short-term but for those who have even a few years until they need their money, it’s hard to envision a scenario that won’t be improved by investing (or remaining invested) now.
Mortgage interest rates are near all time lows and we think they could possibly drift a bit lower. Those who have equity in their homes and rates greater than 4% will probably be able to choose between lower payments and a shorter term. Although there are national and internet banks now vying for our attention, please consider doing business locally. There’s no substitute for working with someone who can respond personally and whose institution is probably working right now to ameliorate local problems. Rates and closing costs can vary so be sure to check around. And, depending on the specific situation, some aspects of the deal may be negotiable; it never hurts to ask.
Severe weather events seem to be getting more common so we think reviewing insurance coverage is a good idea. People must face many of life’s risks alone but there are quite a few which can be easily shared with others. Flood insurance is available even for persons not living in a flood zone and it would simply be prudent to evaluate the cost of coverage vs the potential for loss. Most homeowners’ policies cover direct wind damage but perhaps not that resulting from power lines having been blown down: food lost when the refrigerator goes off or damage from water rising in the basement when the sump pump fails. These and other ancillary events can be covered at reasonable cost and we think everyone should at least examine their options.
Thinking a bit more about insurance, many older people no longer need all the life insurance they bought when they were younger, perhaps when they had children at home, a substantial mortgage or other obligations. Conversely, liability insurance needs tend to rise with age as people accumulate more assets which need to be protected. It would be awful to be in or nearing retirement and be wiped out due to insufficient insurance coverage following an auto accident. If you are a business owner or professional practitioner, you might look especially appealing to a plaintiff, so please be certain you have appropriate umbrella coverage.
Another area which should be reviewed periodically is your estate plan: wills, trusts and related documents. Both laws and situations change over time so anyone who hasn’t visited this subject in the past five or six years should do so. Whether the person who was chosen as trustee or personal representative is no longer able (or available) to serve or there’s one more (or less) beneficiary to receive the inheritance, the various documents can be brought up to date easily and inexpensively. In Columbus, a simple will rarely costs more than $500 with updates often costing less. We believe that reviewing your current will or writing a new one is likely to offer considerable peace of mind at a very reasonable cost. Just like life insurance, these documents do not provide a benefit to the owner but to that person’s loved ones. Don’t miss out on a chance to take care of those people, causes and institutions which are most important to you.
The shelter in place order has many of us spending more time at home. This might be the ideal time for you to discuss some of these topics with those in your household.
Niebuhr’s prayer offers a sensible approach, especially in this time of frightening health statistics and the associated economic turmoil. Focusing on things that can be controlled is one way to avoid feeling overwhelmed by the world’s problems. Acting on those issues which are within your power may provide at least a bit of serenity. If you want to begin, Jalene, Andy and I are here to help. All you have to do is ask.