A recent surge in U.S. job lay-offs – from technology to transportation, healthcare to media – is causing many workers to think twice about their approach to savings, severance and investments. January saw over 108,000 job lay-offs announced – the worst start to the year since 2009, while companies’ hiring plans plunged to a record low, according to Challenger, Gray &amp; Christmas.



However, considerations for those who are suddenly no longer living off a regular paycheck are quite different. Abruptly, wealth creation takes a second seat to wealth preservation strategies. In such cases, although ETFs are a choice, one needs to think about timing and allocation.



<h2>Cash Flow Comes First</h2>



The biggest change, post-layoff, isn’t market volatility, but the lack of income. Severance packages and savings add up to paying months' worth of rent, EMI, insurance, and other expenses.



Financial planners usually advise holding a substantial emergency fund in place before investing. Holding too much money in markets, even through diversified ETFs, may not work if funds are needed during a downturn.



<h2>Broad Diversification Over Sector Bets</h2>



For those who do invest part of their severance, broad-market ETFs often make more sense than concentrated sector exposure.



Funds like the SPDR S&amp;P 500 ETF Trust (NYSE:SPY) or the Vanguard Total Stock Market ETF (NYSE:VTI) provide diversified exposure to U.S. equities without placing large bets on any one industry, especially when layoffs are concentrated in tech or media.



Workers leaving technology jobs, for example, may already have career and investment exposure to the same industry, increasing the overall risk.



<h2>Income-Focused ETFs Gain Appeal</h2>



With salary income paused, some investors can consider ETFs that are designed to generate cash flow:



<ul>
<li>Schwab U.S. Dividend Equity ETF (NYSE:SCHD) focuses on companies with consistent dividend histories, such as Lockheed Martin Corp (NYSE:LMT) and Texas Instruments Inc (NASDAQ:TXN).</li>



<li>iShares Core High Dividend ETF (NYSE:HDV) focuses on relatively stable dividend payers like Exxon Mobil Corp (NYSE:XOM).</li>
</ul>



These aren’t replacements for a paycheck, but they can modestly supplement cash reserves.



<h2>Stability Through Bonds And Low-Volatility Funds</h2>



Bond ETFs often come up in conversation when job security weakens.



Examples include:



<ul>
<li>iShares Core U.S. Aggregate Bond ETF (NYSE:AGG) for broad fixed-income exposure.</li>



<li>Vanguard Total Bond Market ETF (NASDAQ:BND), another diversified bond option.</li>
</ul>



At the same time, lower volatility equity ETFs like the Invesco S&amp;P 500 Low Volatility ETF (NYSE:SPLV) can be attractive options for those looking for more stable equity exposure.



None eliminate risk: markets don't offer severance guarantees, but they can help manage risk.



<h2>Avoid Lump-Sum Timing Risks</h2>



Investing the entire severance package at once makes an investor vulnerable to market timing risk, especially when the economy is uncertain due to AI disruption and restructuring and/or reduction in corporate hiring.



Gradual allocation strategies can help smooth entry points, especially if the job search period lasts longer than the individual had hoped.



Loss of a job tends to cause shifts in financial psychology; but this is not irrational because of the legitimate need for liquidity.



ETFs are still good tools since they bundle diversity, transparency, and cost-effectiveness. But post-layoff, their purpose is no longer about making money, but keeping financially stable until the next source of income starts.



And that's because, when paychecks stall, portfolios need to work harder but also work smarter.



Photo: cunaplus from Shutterstock

The rise in U.S. layoffs is prompting workers to rethink their financial strategies. With over 108,000 layoffs in January, financial planners emphasize the importance of preserving wealth over creating it. Post-layoff, maintaining cash flow is crucial, and broad-market ETFs like SPY and VTI are recommended for diversified exposure. Income-focused ETFs, such as SCHD and HDV, can supplement cash reserves, while bond ETFs like AGG and BND offer stability. Gradual investment strategies are advised to mitigate timing risks, as the focus shifts from profit-making to financial stability during job transitions.

- The recent rise in U.S. job lay-offs, particularly in sectors like technology and healthcare, has led workers to reconsider their savings and investment strategies, with January reporting over 108,000 lay-offs, the highest since 2009.  
- Financial planners recommend maintaining a substantial emergency fund and suggest broad-market ETFs for investment, while emphasizing the importance of cash flow over wealth creation during this uncertain period.  
- Additionally, investors may turn to income-focused ETFs and lower-volatility funds, recognizing that these can provide modest cash flow and help manage risk without guaranteeing severance.

Laid Off? Here's How ETFs Fit Into Financial Planning After Job Loss