I told myself that I wasn’t going to look at our 401k until the dust had settled about the coronavirus. Staying away from the numbers was the prudent and wise thing to do. Then Blooom, the folks who handle it for me, sent a message through my email. “We are here if you need to talk to someone during these trying times.” Now, I had to look! The news was every bit as bad as I feared. The monthly chart looks like what happens after you reach the top of the roller coaster. So, is it time to panic yet? Gildshire sought some help from people who do this for a living. Manage investments that is. Panicking? We know how to do that. Here is what we learned about the coronavirus and your portfolio.
First off, it isn’t just common stocks that are tanking. Crude oil prices tumbled overnight. Some Treasury bonds plummeted. International stocks are getting clobbered, too. So…
Avoid reckless buying
It may feel state-of-the-art to “buy, buy, buy” when everyone sells, but this isn’t a normal downturn. This is the financial galaxy threatening to panic. This market will recover, but it isn’t springing back immediately. We will have some pretty violent market movement, both directions, as the economic impact of the virus becomes apparent.
If the economies of the world worsen, it could lead to a global recession. In that case, stocks will fall further.
So if prices today look good, remember that they will probably look good tomorrow, as well. Buy more, but recognize the potential for buyer’s remorse if your new stock continues to lose value for a time.
Take an even longer view than normal
Can you hold your positions if you invest but see the market continue downward? If not, stay out of the market for now. Stocks offer the highest potential return, but you must be able to ride out storms. That said…
Keep some liquidity
If stocks relentlessly decline for weeks, you can take advantage with cash on hand. So, invest money today and tomorrow, but always keep money back. Then, reinvest when you see a stock price that is too low to pass up.
Still saving for the long term? Keep adding
Can you think of your investments as a long-term strategy? By “long term,” we mean a decade or so. Then you are in good shape! Keep adding money to a well-diversified portfolio. The longer your timeline, the more you can use this downturn to build long-term wealth.
Investing can be tough, even in good times, so keep your focus on what has worked for you so far. You built your basket of investments on top-flight companies, so stay the course. Bad news today should not become a reason for a poor decision tomorrow. The coronavirus and your portfolio will not always be linked.
As the news on the western front continues to get worse, know that we will survive as a nation and as an economy. The coronavirus will take its toll, picking off mostly those among us who are already sick or compromised. Each death is a tragedy for a family and loved ones but an inevitable part of the circle of life. The intersection of the coronavirus and your portfolio does not have to become a financial Waterloo. Be smart, stay safe, and keep watching this space for news as it breaks.