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Here's where you should be moving money when markets are down.
- If you have money to move right now, consider a high-yield savings account for a safe option that you can easily open from home.
- Brokerage and retirement accounts are smart places to put money also if you have many years before you plan to take it out.
- CDs can also be a smart, safe bet, even though interest rates are fairly low right now and CDs restrict your access to money for a given amount of time.
- See Business Insider's picks for the best high-yield savings accounts »
Since the outbreak of the new coronavirus, the markets have been up and down. Investors have seen their portfolios dip, and many people have been looking for the smartest places to keep money right now.
When it comes to investments, the smartest place for most people to keep money is exactly where it is - if it's invested, keep it invested. As financial adviser Jeff Rose previously wrote for Business Insider, "If your goals are the same as they were last week, your portfolio should remain the same."
However, there are some cases where you might want to move money around. If your work has suffered recently and you need to use your emergency savings for immediate expenses, it's OK to move money into your checking account. If you don't have emergency savings, you might want to focus on building them in a savings account instead of investing more money in the market right now.
Here are four good places to put money as the stock market falls:
1. A high-yield savings account is usually a safe bet
A high-yield savings account is a great place to keep money when markets are falling - your money can grow with a low interest rate, but is still liquid and sheltered from the volatility of the market.
Monica Sipes, a financial planner and Senior Wealth Advisor at Exencial Wealth Advisors, says high yield savings accounts are a good place to keep money out of the storm. "Online savings accounts are looking pretty interesting, and a lot of them do pay higher yield than some of the Chase, Bank of America types," she says. Lower overhead costs allow online banking services like Ally and others to offer much higher interest rates. Plus, there's no need to leave the house to open one, she adds.
They're great places to put an emergency savings fund, which is certainly worth bulking up in times of uncertainty. It's worth noting, however, that interest rates could change as the prime rate set by the Federal Reserve changes. But with a high-yield savings account, you'll certainly earn more than you would with a typical savings account.
2. Keep putting money into your retirement account
Despite all the ups and downs in the market, your retirement account is still a relatively safe (and smart) place to keep money if you still have many years before retirement.
"The US and international capital markets have always been extremely resilient, and we don't have any reason to believe that this time is different," Sipes says. The median yearly performance for the S&P 500 was 10.98% between 1982 and 2012, despite the many ups and downs that happened over those 30 years. This time, Sipes predicts, will be no different. "Have we seen some very alarming and scary losses in the short term? Absolutely. But thinking five, 10, 15, years, or maybe even further down the road, you have to think we will come out ahead," she says.
For anyone who is years from retirement, investments within that 401(k) will have years to make a comeback.
3. It's still smart to keep investing - even though markets are down
Your brokerage account is still a perfectly safe and smart place to keep money, Sipes says. Historically, there's a good chance that the markets will rebound fully.
"The capital markets have been one of the greatest wealth generators of all times," Sipes says. "It does require confidence, which is difficult in a situation like this. But, I have to think that you will be rewarded given some discipline and patience."
For anyone who's investing currently, continuously putting in the same dollar amount over a number of years can help combat against the extremes of the market. This strategy, called dollar-cost averaging, can help alleviate the ups-and-downs of the market over many years of investing.
4. CDs are a secure choice
A certificate of deposit, also called a CD, is a bank-issued type of savings account that keeps money committed for a predetermined length of time. While this type of savings usually earns more interest than even a high-yield savings account, it will charge a penalty if you need to take it out early.
"In the current environment, interest rates are pretty low," Sipes says. As federal funds rates have dropped sharply since the beginning of the coronavirus outbreak, interest rates on everything from savings accounts to CDs have fallen alongside it.
However, CDs lock in a fixed interest rate for the duration of the term. If you open a CD now and interest rates continue to fall, your money will be locked into the initial interest rate. For some, the security is worth it. "That's really a question for every investor: Is it worth it to lock up my funds for a very low interest rate?" Sipes says.
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- The best high-yield savings accounts right now
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