Ways to weather a downturn: examine your cash, pick up bargain stocks, improve your skills, learn about catastrophe prevention, learn self-soothing strategies.

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Every dog has their day. This appears to be that day if the number of people out walking them is any indicator. That’s a pretty upbeat example of good actions to take during this economic crisis: Take care of yourself, turn for comfort to those you love, pursue activities you otherwise never have time for and stop refreshing the screen showing your portfolio.

Above all, do not blame yourself! This is no individual’s fault. What’s happening to your portfolio has happened to everyone, no matter how prudent, frugal or research-oriented you’ve been. It’s affecting just about every industry, and because it’s so widespread — consumer, services, manufacturing, banking — every sector — even very well-run companies, worldwide, with excellent products, services and marketing are seeing their stocks plunge.

As with all emergencies, we cannot predict what they will be. But we can predict that emergencies will happen, and they either get remedied or worked around. Each emergency is different, but the way to resolve them is the same: Sit tight until you can see a clear path to what is to be done.

We don’t know what that path will be, yet. Whenever I, or clients, can’t decide what to do it’s generally because we don’t have enough information. Today’s  situation is fraught with lack of information: How long will the COVID-19 pandemic last? Which companies will collapse, which will take time and which will ultimately come roaring back? Will new products be developed and will they have long-lasting or short-lived appeal? How effective will any government intervention be? Will current events increase partisanship or cooperation? Will the crisis shift national attitudes to unions; safety nets; immigration; health care; employee, women’s, minority and disability rights; and care for the elderly? We can’t answer any of these, yet.

The worst thing you can do is make decisions with insufficient information. So, right now, it would be good to recall the Great Recession, or 9/11, or any of the other economic crashes in the past decades. We’ve had such a good upward trend that many people had come to believe they were far more risk tolerant than they now find they are in real time. Is there anything you can do?

1.   Examine your cash stash.

Do you have enough in an emergency fund: three months to two years, depending on your personal situation? When I’ve advised clients, usually we’re thinking of personal rather than system wide emergencies. So, so many people have told me “cash is trash” and doesn’t make any money. It doesn’t return any, either, but it is a stable anchor in a crisis. Make plans in the future for what’s enough, but not too much that you lose future returns.

2.   If you have cash sitting on the sidelines, and are pretty sure you won’t need it for a few years, you can pick up some bargains.

If you had a watch list of stocks, at least some will have moved into the “buy” range. Has the market bottomed? There’s no way to know, but great companies, particularly steady dividend payers, will have the best chance of surviving and surging back.

3.   Now’s the time to improve your skills. 

You know that pile of BetterInvesting Magazines you’ve never gotten to? Now’s the time to read them, learn more about analysis and understand how current events have affected recommendations. Take the time you’ve never had to watch videos, read newsletters, and decide who is sensible and who is ridiculous.

4.   Learn more about catastrophe prevention.

Do annuities, insurance or long-term care strategies seem more important now? Even if you can’t take immediate action, you can improve your understanding of their advantages and drawbacks. You’re assembling information so that when you are able to act, you’ll be well equipped to do so.

5.   Learn self-soothing strategies.

Too often, when people are panicked, we seek to rid ourselves of the panic by taking any action rather than riding the wave until it subsides.  A typical scenario is that we see our investments plunging and sell out “before it’s too late.” Then the market comes back (it always does), but we missed getting back in because we were afraid it was a temporary improvement, or felt that we had evidence of our own incompetence, or just didn’t have time since it didn’t seem urgent. Learning more about investing is one strategy. But disengaging and pursuing a hobby, exercise, outdoor walks, playing with pets or our children, catching up on your book backlog or a 100 other things that the internet can suggest to you are all worthwhile. Two things I can say with certainty — don’t overeat and don’t panic sell. I even give you permission to subscribe to more than one streaming service. Find activities that will distract you and even better, will give you pride in having achieved something.

Even as a financial adviser, I can say that life is not all about money. I wish you health, joy, and comfort in all those other things.

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Related  Resources:  
Uncertain Times Call for Common Sense
BetterInvesting Educator Urges Investors to Stay in Market, Even Seek Bargains
Investing in Turbulent Times Webinar

 


Danielle L. Schultz, CFP, CDFA, is a fee only financial adviser with Haven Financial Solutions, Inc., based in Evanston, Illinois. She’s the author of “Idiot’s Guide: Beginning Investing.” Contact her at www.HavenFinancialSolutions.com

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