What we know . . .
As I write this to you the markets have not yet opened for the first trading day of March. As you are reading this you will have at least three or four more days of information to process. Information is really important as you understand these events. Hype and politics add nothing of value to your ability to decide the best course of action for you and those you love.
We do know that the market correction has happened at historic speed. In less than ten trading days the stock market index (I’ll be most often referring to the Dow, but the observations apply to the Nasdaq and the S&P 500) moved from record highs to full-blown correction with declines measured in excess of 10%
Coronavirus is certainly the key talking point of this decline. ‘Experts’ have sprung from the woodwork to declare this health concern and all its economic implications as both horrific and inevitable. Voices of reason have been shouted down as Pollyanna, uncaring, and unprepared.
No caring person will deny the human impact of a virus that has killed (at this date) 3,000. 90,000 plus people worldwide have been infected. The 3% rate of fatalities is significant. As I understand the numbers, the fatality rate for SARS was 10% and for the Ebola virus 50%. All unacceptable loss of human life. In context, the Centers for Disease Control (CDC) estimates that during the 2018 flu season more than 45 million people were infected worldwide and more than 61,000 people died – about 12,000 in the United States alone. Again, unacceptable loss of human life.
So what is driving the impact of the coronavirus on the stock markets? From my perspective I see three things. First, the media. When a single country reports a single case of the virus it is shouted as evidence of the ‘pandemic’ that cannot be escaped. Second, politics. ‘Let no good crises be wasted’ is a long standing guide for politicians who have no one’s best interest at heart except their own. Third, fear. We fragile humans are always afraid of the unknown. Until just a few weeks ago coronavirus was a name known to a few scientists and medical professionals. Now, with little or no direct knowledge, it’s on the agenda for people and corporations around the world. And, truth be told, none of us know what the end result will be.
Which leads me to my psychic abilities – or lack thereof. Anyone who claims they ‘knew this was coming’ is a liar, a fool, or both. Clients of financial advisors who berate them for not ‘getting us out of the market before this all started’ are too ignorant (please don’t be offended for this proper use of the word – unless of course it applies to you) to be investing in the stock market in the first place.
No advisor worth their salt (or their license) would claim to know in advance the movements of the markets for even the next hour let alone the next day, week, month or year. As I write to you this morning, the markets will open in several hours. The Dow futures are bouncing from up to down and back – more than 1,000 points of swing in just a few hours. No one knows where the Dow will be found at the end of the day. Any client who wishes the ‘inside track’ to unknowable information should do the financial advisor community a favor and change their thinking to become a do-it-yourself investor.
With the sheer volume of noise and hype we know it is difficult to keep your focus on the most important numbers – your numbers. Many investors hear of dramatic drops in the markets and assume they have suffered dreadfully. In reviewing their personal investment portfolio performance, two members of our More than Money family found that – including the most recent market freefall – they had net gains on more than 10% over the past fourteen (14) months.
Take the time to review your personal investments. You may find you have weathered this storm better than you feared. Of course . . . it is quite possible . . . it is worse.
What should you do?
It depends. If you’ve been reading my letters for any length of time – or tuned into my radio show – or seen my tv shows – you’ve heard this many times before.
It depends. Everything you consider doing needs to be measured against your specific, personal situation. This is no time for ‘rules of thumb’. This is no time for generalities. It is more important than ever that you are very clear about who you are as an investor and what you need and wish your money to do for you. It is the only way to make financial decisions that are in your best interests.
With ‘it depends’ as the very foundation of our discussion, I have constructed a list of seven (7) actions you can take to keep you on track to your financial goals. If after you’ve reviewed my list you don’t find one (or more) that seem to fit your needs – please contact me (call, email, stop in). Our More than Money advisors provide free second opinion meetings to provide just this kind of feedback. Take advantage of this opportunity to gain exceptional clarity for your financial choices.
Do Nothing
Do you have three or more years for your financial goals? Do you have a solid, well-constructed, personal investment plan in place? Are you sleeping ok and keeping breakfast down?
Do nothing. Ride this roller coaster out.
Get Out of the Stock Market
Are your financial goals short-term (3 years or less)? Are you losing sleep or losing lunch? Can you achieve your financial goals with rates of return that you can find at a bank?
Get out of the market. And don’t go back until something changes in either your financial goals or your ability to ride the coaster.
Dial it back
The stock market (or any market – bonds, real estate, metals, etc.) is not an all or nothing proposition. You might choose to be 100% in the stock market or zero. You might choose to be ‘nicely balanced’ half in the stock market and half in other types of investments.
These are choices we all make based on many factors. The best determinate of the amount of your investment dollars you should have in any market is the rate of return you need to achieve to meet your financial goals. If you find, under today’s circumstances, you are concerned about being 50% in the stock market consider dropping that to 40% – temporarily. Take a breather, but don’t quit the game.
Buy more stocks or stock mutual funds or stock ETFs
Is this a real buying opportunity. I will answer that question with absolute confidence – in about six months. I am very skilled at calling buying opportunities long after they appear. (Refer back to my discussion about psychic abilities!)
Buying opportunities are in the eye of the beholder. If you have time on your side (3 years or longer to leave your money in the market – the longer the better) than this is likely an opportunity.
Change investment platforms
Investments come in many different flavors and platforms.
Most investors have only experienced stocks and bonds. Perhaps mutual funds and ETFs. Other investment platforms offer varying levels of protection. Many annuities offer principal protection. You can find income guarantees on many types of annuities as well. And annuities are just one alternative to consider. If you are finding this experience too much – explore your options.
Combo packs
America is the land of the free. And that certainly applies to the world of investments.
As you reviewed numbers 1-5 you may have found something attractive under more than one option. As a free American you are free to combine more than one approach to meeting your investment needs.
A very common combination these days is using some type of annuity to provide a baseline of guaranteed income in retirement, paired with a managed investment account of mutual funds and ETFs in the stock market to provide potential growth for the future. And that is just one (simple) example. The combination (and permutations?) are nearly endless.A bottle of wine – or a Second Opinion Review – or both
It may be that you just need to turn off the tv, radio, and internet; enjoy a fine bottle of wine; and chill.
It may be that you aren’t getting enough guidance and useful information. You may have been relying on an advisor that disappears when you need them most. Or you may have been relying on a person totally unqualified to provide you with quality advice – yourself.
It may be time to drop into the More than Money world headquarters (in the Holy Lands between Bethlehem and Nazareth) and spend an hour with a More than Money advisor. Get your questions answered. Get a solid plan in place that fits you. Gain some peace of mind. No charge. No pressure. All you need do is ask.
We hope to see you soon.
Please allow us to serve you and those you love.
Thank you,
Gene
P.S. Shoot me an email with your questions and comments – Gene@AskMtM.com.