Home / Business / Because it may be time to merge your investment strategy with your disaster preparedness plan

Because it may be time to merge your investment strategy with your disaster preparedness plan

Customer calls usually start coming in whenever stock falls by surprise.

But lately, financial advisors have received more calls from clients worried about the devastating West Coast wildfires, which this year occurred in the midst of the worst public health crisis in a century.

“We always get a lot of calls after a bear market hits,” said Deron McCoy, chief investment officer at Signature Estate & Investment Advisors, in Los Angeles. “Customers are always asking what they should do.”

His advice? Plan ahead before calamity strikes, particularly if you live in places vulnerable to climate change, which now threaten to worsen fires in California.

“You need to fix the roof when it’s sunny,”

; he said.

Well over 4 million acres have been burned in California since the beginning of the year, more than double the land burned in a previous year, according to the California Department of Forestry and Fire Protection.

For McCoy, that means urging customers not to get caught in a position where they become forced sellers when something bad happens – a tall order this year.

“Don’t put your living expenses into stocks,” he said. “Don’t have December rent in Tesla

More generally, Silicon Valley workers are likely to diversify from a portfolio construction standpoint. “They love their tech, but their homes are tied to tech bonuses too,” McCoy said.

Some aspects of preparing for a disaster can be counterintuitive. For example, booming home tech stocks, including The Apple company.
Google Parent alphabet

is Facebook, Inc.
they were clear benefactors during the pandemic.

But this year also saw idyllic Bay Area tech campuses shrouded in thick smoke and ash from the Northern California wildfires.

Smoke from the wild Bay Area hit closely

Justin Sullivan / Getty Images

“If you live dangerously, you may not want to have all of your investments there,” McCoy said.

Bay Area homes hit record prices in August even with the coronavirus and wildfires, with existing single-family homes being sold for an average price of nearly $ 1.07 million, nearly a 19% annual price increase, according to a report from the California Association of Realtors.

This compares with a 26% year-to-date increase in Facebook’s shares Tuesday, while those of Alphabet were up 8.7% and those of Apple were up 54.1% over the same period, according to data from FactSet. .

Related: Big Tech shares fall due to reports the House subcommittee wants to split them

Major US equity indices closed lower on Tuesday after President Trump called for a pause in stimulus talks with Democrats until after the November 3 election. But despite a tumultuous September, the S&P 500 index

However, on Tuesday it closed trading 6.1% off its record close a month ago, which marked its fastest recovery in history from bear market territory in March.

Preparing for the “Big One”

The other big concern is that California stays behind for the “big,” or catastrophic earthquake of magnitude 7.8 or greater that is expected to hit along the southern San Andreas fault.

“Are Californians prepared? Absolutely not,” said Luis Strohmeier, partner and wealth advisor at Octavia Wealth Management. “It’s not like Japan, where they practice monthly.”

To better prepare, Strohmeier advises his client to call the builder or original architect of his home to locate the strongest part of a home.

“Every home has an area that would probably withstand the worst of an earthquake,” he said. “Understanding this is important.”

But in terms of risk coverage, he also said earthquake insurance policies can help, but they are often expensive and have high deductibles, meaning only a fraction of homes are currently covered.

There is also a risk of earthquake-related fires. To that end, Strohmeier also loves to see his clients upload all of their deeds, legal documents and estate planning materials to an electronic vault and their valuables, including cash and jewelry, to be stored in a fireproof safe.

Role of companies

Although the pandemic has required many companies to keep their employees working remotely, that doesn’t mean companies have less responsibility to their employees or investors during a disaster.

“The most important thing is to protect vital assets and have a business continuity plan in place,” said Dr. Louis Gritzo, head of research at FM Global, a corporate property insurance company.

He said the climate warming trend also means many companies will need to strengthen their existing disaster plans and communicate them better to employees.

The FM Global survey in 2012 found that 75% of US workers believe their employer is not well prepared for a natural disaster.

“In general, people don’t have a lot of confidence that they will get a job after a crisis occurs, whether it’s an earthquake, fire or flood,” Gritzo said. “They’re not entirely sure their company will be there. And that plan needs to be communicated.”

Related: Evacuation due to hurricanes or fires? Put these items in your “financial bag”

Source link