Posted March 16, 2020 by John Posey
You may be wondering if recent happenings in response to the threat of spreading Covid-19 should warrant a change to your investments. The short answer is probably no, but I’ll get to that in more detail. First of all, I am not going to downplay what impact coronavirus will have. Be safe and follow the CDC recommendations. The actions already taken to combat the potential impact of the spreading virus has been swift and significant. The impact these events will have on the economy and markets is uncertain which is why we’re witnessing significant swings in the equity markets currently. More uncertainty equals more market volatility. I can relate with the feeling that taking some sort of action with your investments seems like it could be warranted given the circumstances – it’s human nature, but I strongly advise you against taking an action based on emotions. Market timing (getting into and out of the market) is a fool’s game which commonly produces poor outcomes. Here’s what we all need to remember in times like this: Markets have always recovered. I know you can tell me, ”But this time is different!” I’ve yet to witness an event that forever changed the basic fundamentals of the financial world as we know it. Believe me, that kind of talk was at a fever pitch nearly ten years ago during the Great Recession. Sure, I suppose it could be different this time but in my estimation it might be the statistical equivalent of spotting a real-life leprechaun this upcoming St. Patty’s Day.
The kind of action I’d suggest taking right now is doing things that can help “Flatten the Curve.” See the chart above. This is referring to taking protection measures that help prevent the spread of the virus and stay within current capacity of the health care system. Here is the source of the chart which is a good article on how we can help slow the spread of coronavirus. Also, here is a great video passed on to me from a retired physician that is a simple breakdown of coronavirus and preventative measures you can take provided by Nebraska Medicine/UNMC. Keep in mind that most of Plains Advisory business can be done over the phone, email or even a video web conference. With advances in technology, it is easier than ever to get things done remotely. At this time, it will be business as usual at Plains Advisory while taking a flattening of the curve approach.
For all Plains Advisory clients taking income from their investment portfolio, I remind you that we were prepared. You have a war chest of cash and bonds to weather these kinds of storms in the market if you’re currently taking regular distributions so breathe easy. Significant market declines are to be expected from time to time and our strategy takes that into account. You may not enjoy looking at your account values as much right now but remember our strategy is designed for long-term success. I’d suggest taking a break from monitoring your values too often if it causes you stress. I know you don’t monitor your home value daily so consider treating your investment accounts in a similar way if it helps. And as a side note, if we discussed doing Roth IRA conversions in year 2020 from past conversations, now would be a good time for us to revisit that idea so feel encouraged to reach out to me on that topic.
For all still accumulating and contributing for the future, grit your teeth and consider adding more to your accounts now. As Warren Buffet says, “Get fearful when people get greedy and greedy when people get fearful.” Market declines provide better opportunities to buy low and build long-term wealth.
And lastly, for all with a hindsight of 20/20 that regret investing cash at less opportune times within the past year, I and countless investors can sympathize. The unfortunate truth is we never know exactly how or when a market decline is coming or how long it will last. As such, the market may have further to go down yet, but history tells us it will swing the other direction at some point. Investing at the rock bottom of the market is just getting lucky so never expect you can do it, but it still makes sense to try. The good news is investment contributions made for the long-term at any time within the past twelve months still offer a great opportunity to provide significant growth over the long haul. Over time it’s likely to produce good results.
Stay safe and focus on the things that matter AND you can actually control.
Advisory services offered through Plains Advisory LLC, an investment adviser registered with the State of Nebraska. Insurance products and services are offered and sold separately through John Posey, a licensed insurance agent. No investment strategy can guarantee a profit or protect against loss in periods of declining values. Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance. Past performance does not guarantee future results. Consult your financial professional before making any investment decision.
Any information provided is designed to provide general information on the subjects covered, it is not, however, intended to provide specific legal, tax, financial or investing advice and cannot be used to avoid tax penalties or to promote, market, or recommend any plan or arrangement. Please note that Plains Advisory LLC does not give legal advice. You are encouraged to consult an attorney.