I’M STRUCK by how calmly I’m taking this fast-and-furious coronavirus selloff. The human toll is getting worse every day, and the economic and other consequences could be catastrophic. But I’m not tempted to sell. I’m also not in a hurry to buy the dip, though admittedly my pulse quickened Friday afternoon when the market was down 15% from its Feb. 19 high.
There’s absolutely no way to know what will happen first: Whether I’ll regret not buying the dip or Dustin Hoffman will knock on my door in a biohazard suit.
AMID THE PAST WEEK’S stock market downturn, many people are asking two questions:
“How bad will it get?”
“How long will it last?”
I can’t answer these two questions, and nor can anybody else. But I have an answer to a third question: “What should I do?” Below are seven thoughts:
1. Ask financial advisors what they recommend at a time like this and most will offer the same advice: “Don’t panic.” While I agree,
HERE’S THE LEAST surprising thing you’ll read this week: You can’t control the financial markets. They’re driven by news—and we simply don’t know what news we’ll get in the weeks and months ahead, whether it’s about the spread of the coronavirus, its impact on the global economy or something else entirely.
But don’t despair: There’s also much that we can control, including how much we save and spend, the amount of investment risk we take,
I’M WRITING this just before 6 a.m., following a few days during which world stock markets caught their own version of the flu. Frankly, I can’t sleep thinking about what’s happened—and especially about the investors who panicked and locked in their losses, just like so many folks did in late 2008 and early 2009.
It took me a few minutes to muster the courage to look at my 401(k). When I did, there was no shock: Yes,
AS A TEENAGER, I started to invest by buying a boring old target-date retirement fund. But from there, I became an avid watcher of CNBC while studying finance in college. Indeed, my first financial love was technical analysis. Even today, when markets turn volatile, I’m as susceptible as the next investor to turning on financial cable TV to check out the supposed carnage.
Still, as time has worn on, my perspective has grown longer term and away from day-to-day market movements.
WHEN MY YOUNGEST son graduated college, he had two solid job offers. One would have allowed him to live at home for free and the other was halfway across the country. Guess which one he picked?
In fairness, the job far from home was more interesting to him and provided a great start to his career. I remember him sitting down with his mother and me, and telling us he was planning to move to Texas.
IMAGINE the coronavirus caused the U.S. economy to shrink 4%. What sort of drop in share prices might this trigger?
As it happens, we already know the answer. Over the 18 months through mid-2009, U.S. inflation-adjusted GDP slipped 4%. Investors—panicked over what the future might bring—drove down the S&P 500 stocks by a jaw-dropping 57%.
In retrospect, this seems like a bit of an overreaction.
To be sure, late 2008 was a wild time.
MY THREE FAVORITE words in response to questions about investing and trading: “I don’t know.”
Nothing underscores that sentiment more than bitcoin and other cryptocurrencies. I work on a trading floor, where it pays to have an opinion on just about every tradable asset. But I’m the oddball on the floor. I roll my eyes when I hear blanket market predictions and the latest hot stock tip. I’m even on a personal crusade to remove CNBC from the TVs at work.
“FOLLOWING the market’s recent banner year, should we just sell everything and get out?” I got that question recently, and it’s entirely understandable. Since hitting bottom in 2009, U.S. share prices are up fivefold, including the S&P 500’s 31.5% total return in 2019.
Individual investors aren’t alone in asking this question. A few weeks back, at an industry conference, James Montier delivered a presentation in which he compared the U.S. stock market to “Wile E.
AFTER YEARS of handwringing, you finally concede that it’s all but impossible to beat the market over the long haul, so you shift your portfolio into index funds. Next up: the truly tough decisions.
Almost every writer for—and reader of—HumbleDollar is a fan of indexing, and there’s no doubt that index funds are a wonderful financial tool. But how will you use that tool? Let the bickering begin.
The differences of opinion show up among the articles we run on HumbleDollar.
IN EIGHT YEARS, my wife and I will be age 72—and we’ll be locked into required minimum distributions from our retirement accounts for the rest of our lives. Nearly all of our savings are in tax-deferred accounts.
At that juncture, we’ll also have begun Social Security payments. The upshot: Our tax rate will jump significantly and, thanks to the combination of required minimum distributions (RMDs) and Social Security, our income will easily exceed our expenses.
HOW OFTEN DO you think about money? Hey, you just did. Seriously, we think about money every day and sometimes every hour. Some studies say we ponder financial matters even more often than the old standby: sex.
We’ve been thinking about the stuff for a long time. Money goes back about 3,000 years. Paper currency can be traced to China in 700 BC. They didn’t fool around: Their currency stated that all counterfeiters would be decapitated.
A NATIVE CHICAGOAN, I bailed out and am now a Southerner. Or at least a Florida Man. So I attend church each Sunday. If you attend church in the south, you will inevitably hear someone respond to a “how are ya?” with “well, I just keep on keepin’ on.”
With all the fanfare about this bull market, and especially large-cap technology stocks, it can be tough to keep on keepin’ on and stick to your long-term plan.
NONE OF US wants to contemplate our own mortality. But we all need to think about it—including thinking about life insurance.
I was lucky enough to have a long tenure with a large company that provided term insurance at reasonable prices. My employer provided two times our salary in coverage and we had the option to purchase additional coverage equal to eight times salary. I was also able to buy insurance on my wife’s life equal to three times my salary.
MANY PARENTS assume that what counts are the big events, such as graduations or elaborately planned vacations. But I’ve always found that the best moments in life weren’t necessarily the ones circled on the calendar.
The stock market is a lot like family life. Forget trying to figure out the ideal moment to get in or out of the market. Instead, what really matters is the time spent sitting around in stocks.
Jerry Seinfeld affectionately calls his mundane interactions with his kids “garbage time.” He prefers that label to what most parents aim for—the impossible-to-meet “quality time” standard.