If you’re fortunate enough to not have your family income reduced during this time, there are some opportunities to protect yourself and grow your long-term wealth if you are under the age of 55.
I want provide context and hopefully help people make better decisions with their money during this pandemic. So I’m going to share what I’m doing. To preface, I am not retired yet, so my style of investing at this stage works for me, my family, and my circumstances. If you are retired or close to it, I would NOT take this as a rule of what you should be doing.
Nothing about the future is ever certain, but the current situation dealing with COVID-19 involves a known uncertainty in that we know things are worse than anyone could have predicted and we have no idea how long this will last.
Money almost feels secondary at this time, but that doesn’t mean we shouldn’t pay attention to it.
Here is what I’m doing:
- I’m paying attention to my cash reserves. The common rule of thumb is to have 3-6 months of living expenses, but I think this isn’t enough. I usually keep a good cushion anyways (then again, I’m a business owner, so I’m more conservative than most when it comes to hoarding cash). I don’t care how much I am earning on it from the bank, because it doesn’t matter. I just care that I can get to it when I need it.
- The majority of my portfolio is in the stock market and it looks EXACTLY like the stock portfolios we manage for our clients (in terms of equity exposure). When I review my accounts, I am also reviewing theirs.
- I’ve been buying. I continue to buy into my portfolio periodically, especially through this downturn, but this isn’t anything new. All of these purchases are on autopilot. When stocks were rising, I was buying less shares. Now that stocks are falling, it means I’m buying more shares. I’m not touching the majority of this money for a decade or longer. Right now stocks are “on sale.” This is ultimately a good thing for my savings. It’s painful to look at the value of my current holdings, but wonderful for future balances.
- I’m not looking at my balances right now. There is no reason to. I have a rough idea of how much I have and where it is. Besides, everyone’s in the same boat as I am right now. I don’t need that money at the moment, so I don’t bother to look.
- I don’t care about individual stocks. I don’t know what’s hot or cool to own. I always buy into an entire portfolio and know that within those 14,000 holdings, I already own what’s hot or cool.
- I continue to rebalance. During this time, we have sold positions that have done well and bought into those positions that haven’t. It seems counterintuitive, but it works. It’s “Buy Low/Sell High” on autopilot.
- I’m getting ready to open the floodgates. The U.S. stock market is currently down over 25%-30% from all-time highs. Buying stocks at these levels is not a deal that comes around very often. So, in preparation for this possibility, I’m gathering as much money as I’m comfortable parting with and getting ready to put it into my accounts.
The most important decisions you will make as an investor usually come during a market crash situation. I’m not hoping for a further crash but, if it happens, I’ll be ready to take advantage of the opportunity.
And so should you.