THE PAST FEW weeks have brought back memories of the 2008 financial crisis. Back then, stocks were at bargain prices, but I had little money to invest. Today, my financial house is much stronger—and I want to be ready to buy if stocks get dirt cheap.
I’ve already made some portfolio adjustments. But from here, my plan is to keep an eye on stock market valuations. A large percentage drop by the market averages might—by itself—create the false impression that stocks are cheap,
I’M DETERMINED not to repeat my mistakes of 2008-09. I was ruined by that financial crisis or, more accurately, I let it ruin me. I led into it with my chin.
I’ll spare you the details of my personal situation in the years leading up to the crash, but the upshot is I was egotistical, financially reckless and looking for a big score. As the crisis unfolded, I piled risk upon risk, mistake upon mistake.
I ATTEMPTED to check the markets the other day and everything was the same as the day before and the day before that. Had the world really stopped? No, it was Sunday. The fact is, I have no idea where I am or what day it is. I’m still in the Pacific on a ship full of senior citizens who outwardly have few concerns, except when the restaurants will open. But we are famous,
WE OFTEN PREPARE our taxes, only to learn we owe a substantial sum to Uncle Sam. Most of us believe we can’t do much about this—and yet there’s one simple fix available to many taxpayers: Make a tax-deductible retirement account contribution this year for 2019.
Indeed, thanks to the stock market’s decline, this is a great time to shovel more money into your retirement accounts—and you may discover you can add to more than one account.
THE CORONAVIRUS is prompting people to behave irrationally. They’re hoarding food, toilet paper and other goods. They’re risking their health—and that of those they know—by failing to limit their physical contact with others.
This irrationality has spilled over into the stock market. More than 30% of the U.S. market’s total value has been wiped out. It’s hard to argue that this is justified. The businesses represented by these stocks may be hit with short-term disruptions and a temporary reduction in profits.
LATE LAST YEAR, I described how Bill Gates used to take time out from his job running Microsoft to seclude himself for “think weeks.” For better or worse, many of us today are finding ourselves stuck inside, with more time on our hands than usual. If you’re growing weary of the endless news cycle, below are some ideas to help you make the most of this time.
Looking to build your personal finance knowledge?
TIMES LIKE THESE test the mettle of investors. Want to pass the test? Here are 27 things to do now:
Keep buying stocks. Remember your regret at failing to load up on bargain-priced shares in early 2009? Don’t make that mistake again.
If you’re panicked and tempted to dump stocks, talk to a friend or, alternatively, hire a financial advisor—one required to act as a fiduciary—to coach you through this decline.
Ponder what makes you happy.
AS OF YESTERDAY’S market close, the S&P 500 was down 25% from year-end 2019 and off 29% from Feb. 19’s all-time high. Worse yet, interest rates are near zero, with the 10-year Treasury note yielding a paltry 1.15%. In a few short weeks, the markets have turned from euphoric to disastrous—and there seems to be no end in sight.
At age 43, I consider myself fairly young. But as I watch the markets, what’s been most surprising to me is how many times I’ve seen this situation before.
WE LOVE to procrastinate. Have you done your taxes yet? IRS data show that nearly a quarter of Americans wait until the last two weeks of tax season to file. It often feels like that nagging task that grows more arduous each year, though the result for many is a juicy refund.
The average federal tax refund is more than $2,800, so it can pay to get your taxes done sooner rather than later.
AS THE STOCK market repeatedly hit new highs in recent years, my net worth reached levels I hadn’t expected. But instead of feeling good about it, I was getting annoyed. Most of my retirement dollars had been invested over the past decade at high stock market valuations. I could use a good bear market so that, in my few remaining years in the workforce, I bought stocks cheap.
I also worried that a prolonged downturn at the worst possible time might derail my early retirement plans.
WHEN I WENT to the grocery store last week, it was packed with customers stocking up on essentials. Carts were filled with items that people couldn’t possibly consume in any reasonable period of time. It’s a scene that’s been repeated across the country.
A friend told me: “When people panic, they want things right away. When people see other people panic, they panic, too.” Like the coronavirus, fear is highly contagious.
I’m not panicking,
“WHAT CHANGES have you made to your portfolio during this market decline?” That was the article request I received from HumbleDollar’s editor. Initially, I had reservations about taking on the assignment, afraid that my story would be misinterpreted as giving financial advice. What follows isn’t financial advice, but rather a highly personal account of one investor’s approach.
I’ve been quite cautious for the past few years. Written into my investment policy statement is Benjamin Graham’s advice to have between 25% and 75% of one’s portfolio in stocks.
WHAT IN THE WORLD is happening in the stock market? The short answer: Investors are spooked by a supply and demand conundrum. Markets react very negatively to a significant disruption of either.
After the Sept. 11, 2001, terrorist attacks, stock markets plummeted because of a disruption in demand. In the weeks and months that followed 9/11, factories, businesses and services remained open and operating all over the world. The issue wasn’t a lack of supply.
LAST FRIDAY at 7:16 a.m., I sent an email to HumbleDollar’s editor. We were discussing what this blog post should be about. This was before I got the news alert that S&P 500 futures were up bigtime, following the historic selloff the day before.
I concluded my email to Jonathan this way: “The market never gives you the big fat target you want. I’ve got great plans if the market behaves today like it did yesterday,
FOLLOWING the stock market’s steep decline, sensible investors are faced with three alternatives. The first two are fairly straightforward, but the third option is worth some discussion.
1. Do nothing. If all of your assets are in retirement accounts and you’re comfortable with your risk level, you might choose to tune out the news and do nothing at all. Similarly, if your portfolio doesn’t include any stock market investments, you might opt to watch the market upheaval from a distance,