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April 6, 2020

Investing in a Financial Crisis: How to Stay Calm During a Global Pandemic

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The stock market is going up and down like crazy lately. It's hard to predict what will happen next.

I was an “investor” during the last recession, but my tiny 401k balance at the time was the last thing I was worried about at 27 years old. I was too busy playing in a cover band (oh, we rocked!) and chasing the woman of my dreams (I ended up marrying her by the way).

With this new downturn, I wonder if I'll keep the same carefree attitude.

As a long term investor, I'm supposed to feel comfortable NOT knowing what will happen next. I set a plan years ago and I'm supposed to stick to it in good times and bad. In theory, all will turn out well in the end.

In an attempt to convince myself that I should pay more attention to my family and my health instead of the stock market, I've outlined 5 reasons to stay calm and stick to my investing plan.

1. Realize Retirement is FAR Away

This market downturn is going to be a small “blip” in our overall investment journey. We have 25+ years until we actually need our retirement investments. So unless this market downturn lasts decades, we're going to be just fine.

Our last bull market lasted 11 years! Given the last recession lasted 18 months, I think we can withstand some lows because the highs are coming.

S&P 500 90 Year Performance Chart
S&P 500 over the last 90 Years — Source: MacroTrends.net

2. Practice Dollar Cost Averaging

Even if we're experiencing some lows in the stock market right now, this is time for us to keep buying. That's why we practice Dollar Cost Averaging – buying new investment shares a regular schedule throughout the year.

By doing Dollar Cost Averaging, we're always buying. This allows us to relax and avoid the guesswork of trying to buy when the stock market has truly “hit the bottom”. I believe that's a game no one can really “win”.

3. Stay Diversified

As near 40-somethings, we have a diversified portfolio. We're investing in stocks, bonds, real estate and we have a lot of cash on hand as well.

So if the “stock market” continues to go down, we're not solely relying on the performance of equities. Yes, we have the majority in equities, but with our long term investing horizon, any decrease in the value of our shares shouldn't bother us because … this too shall pass.

4. Buying Low is Fun

Since we are debt-free, mortgage-free and have a 12-month emergency fund in cash, we feel comfortable with investing right now. Our expenses are low, we can hunker down and stay at home during this quarantine time and take advantage of any deals the stock market has for us.

For example, one of the index funds I invest in is the Vanguard 500 Index Fund Admiral Shares (VFIAX). On February 19, 2020, VFIAX sold it's 52 week high at $313.28 per share. Then on March 23, 2020, VFIAX sold it's 52 week low at $206.42.

VFIAX 52 Week High and Low - April 2020
VFIAX Price & Performance Data – Source: Vanguard.com

I was very happy to be buying VFIAX through Dollar Cost Averaging during this “sale time”. The last time it had seen that low share price was 2016.

5. We Only Lose When We Sell

While it might feel tempting to sell when I see the stock market nosediving, I know that's the wrong move for us. I have to realize that we're not actually “losing” any money at all when our investment balances decrease … the value of our shares are just lower.

So with that mindset, if we stay the course, not only are we not losing money, we're getting a chance to increase the number of shares we own if we keep buying.

In short, don't sell and keep buying. Got it, Andy?

Carefree vs. Careless

I'm trying to ride a fine line between paying attention to our family's finances, but not paying too much attention. Stressing about things I have no control over is futile.

While there is nothing I can do about the overall stock market performance, I can be proactive and do the following:

Stay Home

This is a national and global call for everyone to “flatten the curve” with this virus. Our family is doing our best to stay home and make the best of this “new normal”.

Wash Hands Surgeon Style

20 seconds is the new 10 seconds for me! I'm going to have the cleanest hands in the world after this Coronavirus season.

Reduce Unnecessary Expenses

Our major concern is available cash to get through the tough times. We're decreasing our spending on the “non-essential” stuff right now so we're feeling comfortable just in case we lose our income.

Give Back

I'm thinking a lot about charities I've interviewed on my podcast lately.

Feeding America and Together We Rise are two organizations that come to mind right away. Just like Dollar Cost Averaging for investing, we'll continue to donate to the charities who need it most right now.

Be There for my Family

Family comes first for me. I'm going to continue to remind myself of that too. When my mind wanders to “what could happen”, I need to remember to focus on what I can control. Being a good husband and father is a great place to start.


How are you staying calm as an investor during this global pandemic?

Please let us know in the comments below.



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CARPE DIEM QUOTE

We must accept finite disappointment, but we must never lose infinite hope.

Martin Luther King, Jr.


 

Andy Hill

Andy Hill is the award-winning writer, speaker and podcaster behind Marriage, Kids and Money - a platform dedicated to helping young families build wealth and thrive. Andy's advice and personal finance experience has been featured in major media outlets like Business Insider, MarketWatch, Kiplinger’s Personal Finance and NBC News. Trusted as a personal finance influencer and corporate financial wellness speaker by global brands like JLL, Andy’s message of family financial empowerment has resonated with listeners, readers and viewers across the world. When he's not "talking money", Andy enjoys wrestling with his two kids, singing karaoke with his wife and watching Marvel movies.

2 Comments

  • Dollar cost averaging was key to building our wealth because it’s the consistency that counts. We found that whether the market is up or down it magically works out in the end as long as it’s left alone. I also enjoyed your frugal advice! 🙂

    Reply
    • I love it! And it helps me relax more … Thanks for sharing Jen!

      Reply

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