Disclaimer: I am not a financial adviser and this does not constitute as financial advice.
Eerily reminiscent to the real COVID-19 pandemic which contributed to the stock market crash, Warren Buffett described fear and greed as super-contagions diseases that infect investors.
"The timing of these epidemics will be unpredictable," said Buffett. "And the market aberrations produced by them will be equally unpredictable, both as to duration and degree. Therefore, we never try to anticipate the arrival or departure of either disease. Our goal is more modest: We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful."
Most of my money is invested in stocks and has been for over ten years. During the crash, I watched my portfolio drop by tens of thousands of dollars. Meanwhile, my whole life was in transition logistically and emotionally. I am grieving a six-year relationship and all of the love, routines, and physical security that came along with that. Shortly after, the coronavirus pandemic induced widespread societal fear. I had already been vagabounding for a month and, when I was finally settling into a new place in Austin, my roommate got very sick. With no firm diagnosis, she and I both decided I should get out of the house. So, I am once again sleeping on a different bed every few nights, working full-time remotely from all sorts of places. I simply could not handle keeping up with the fear-inducing news and crashing market amid it all.
So, I stopped watching the news and the market today. I committed to a six-month market and news hiatus and gave my brokerage account login and password to my mom so she could keep an eye on it for me. This hiatus includes setting boundaries with people stuck in a perpetual fear mindest.
Then, I took a deep breath and thought of the positives. One, we should expect stock market crashes: they are simply a part of investing. Personally, I believe only in long-term stock market investing (unless you are a psychic, in which case you probably have better things to do anyway). Over time, the stock market has always gone up. If it crashed completely, we have much bigger problems than our own personal retirement age.
Overall, I still definitely have net gains in the stock market. (It’s hard to say how much since I’ve moved my money around some, but I’ve focused on passive investing since age 15, and the overall market has gone up pretty steadily since then.) The crash came after investing about 15% of my savings in real estate property, which offers some diversification. Also, because interest rates are now so low, I feel that buying my own house within the next year is much more likely. Finally, because of dividend reinvestments and my company 401k, I will be getting cheap stocks throughout this economic slump.
Most importantly, losing some money now has ZERO impact on my quality of life today. So, if I let it affect my mood or how I interact with others, it’s irrational and even selfish.
A week from now, I will have no idea if the market is up or down. I already have very little awareness as to the current state of the coronavirus pandemic. I truly don’t care if you call me naive or selfish or whatever. Me staying aware of these things was not helping anyone else and was only causing me to suffer. It was also causing those around me to suffer because then I am stuck in my head, stuck in fear - rather than being present with them.
Want to help during this time when the world feels heavy? Turn off the news, and go learn a new skill or volunteer. If you’re concerned about leaving the home, there are ways to volunteer online.
I am grateful that spring is coming this week, which will bring a fresh start emotionally as well as globally. It’s time to shed the fear that this pandemic has caused and, instead, use this time to realize what’s really important.
WHAT TO DO DURING A STOCK MARKET CRASH:
Do not sell stocks or constantly check status of market. This is especially true if you are under the age of 30 and will not need your investments for over ten years. Now is not the time to sell (see above). Stay the course, stay calm, and get back to work or play. The market is an investment tool, so don’t let it own you by checking it daily. If you are too stressed during recessions, consider changing up your investment strategy AFTER it has rebounded. Look into bonds, dollar-cost averaging, and diversification. Personally, I will not check the market for at least nine months. My mom will check my potfolio periodically during my market hiatus and make minor trades or adjustments if needed (this could also be a trusted partner or personal assistant - someone who has your best interests in mind and knows what they are doing). I have given her permission to do so without consulting or informing me. What the market does from here is completely out of my control, so there’s no sense in me losing precious time or sleep worrying about it. Because most of my stocks are invested in IRAs, I won’t be taking it out for another 30 years anyway.
Focus on saving cash. Experts recommend having three to six month in living expenses in cash at all times. If you don’t have this, now is a great time to start saving. Personally, I am focusing on saving extra cash so I can potentially purchase a house within the next year while interest rates are low.
Remember what’s truly important. I am very privileged in that I don’t have to worry about where my next meal is coming from and, in all likelihood, never will. If you’re reading this, the same is probably true for you. During times like these, it’s very egotistical for me to waste energy worrying when there are people who are truly struggling. So, I am focusing on being present with those I love and helping others when I can. I have my health, my family, and a bright future ahead. Everyone is affected by this current pandemic in some way. Some people are sick and even dying from this new disease; small business owners are closing shop; and hard-working grandparents are pushing back their retirement date. Stop feeling sorry for yourself.
This advice is coming from a 28-year-old single woman who has invested from a very young age. I have seen my money grow a lot but have also already been through downturns (though this is certainly the most severe I’ve seen). While my experience is most relevant to those under 30 who don’t have a family to support, I still encourage you to consider points above no matter your situation. I spent time with my parents and aunt over the weekend - all of which are retired and have most of their money invested in the stock market. They were not worried about their personal financial wellbeing but rather societal health. We stayed positive. We hugged, cooked, laughed, cried, and danced. We did not fearfully liquidate our stocks. Instead, we focused our time on loving each other.
We will get through this. Stay the course.