ETF.com: “Advisors to Clients on Banking Crisis: Don’t Panic”
EFT.com, March 22, 2023 — Marguerita Cheng, CFP® Pro, is featured in today’s article by Heather Bell who writes: “In the past few weeks, we’ve seen the collapse of two relatively small banks that were not considered to be “systemically important” and the rescue of Credit Suisse by its fellow Swiss financial institution UBS.
“That alone has been enough to give investors jitters. But with inflation high and the Fed seemingly determined to continue hiking rates, the banking disasters sent related exchange-traded funds into a tizzy of volatility.”
Marguerita, CEO and founder of Blue Ocean Global Wealth, says investors should remain calm and not do anything rash.
“The first step is to acknowledge that the situation is unsettling,” Marguerita insists. “I am not a therapist. I am not a policy expert. But I explain things.”
She explains to her clients that the FDIC insures individual bank accounts for up to $250,000. “For some businesses, like those involved in construction, more money may be held in cash. I also advise my clients to diversify their banking relationships so that their money is held across multiple institutions at any given time.”
She also understands how disturbing it is that Credit Suisse, domiciled in a country known for its expertise in banking, was the financial institution that needed rescuing. However, she asserts that Credit Suisse has been mismanaged since at least 2020. Still, Cheng believes that the banks themselves are sound, and what has been unfolding is more of a liquidity issue ultimately caused by the hikes in interest rates than anything else.
“If you want to be tactical, there’s an opportunity to buy bank stocks at low prices right now. As a planner, though, I advise against going all in on the sector,” she adds, noting that I-bonds, a Treasury security with interest rates tied to the inflation rate, are still attractive, even if an individual can only buy $10,000 worth of them in a calendar year. “Investors can continue to contribute to their retirement accounts at the same level to take advantage of dollar cost averaging.”