The coronavirus-induced stock market meltdown created a lot of anxiety and opportunity. Let’s look at the benefits!
One of the beautiful things about the internet is that I’ve never met someone online who has lost money in the stock market. When stocks are going up, the bulls are out in full force telling everyone how much they’ve made in XYZ. When stocks are going down, the bears all come out and say they shorted heavily right before the crash. As a result, I think we’re going to be just fine.
Unfortunately, I have about 20% of my net worth long in the stock market, which means I am getting my face ripped off as we speak. The stock market corrections are getting quicker and quicker. This latest 10%+ correction has been the quickest one of them all!
Losing money now is particularly painful because I made a silly goal to accumulate $1,500,000 more capital by September 2022 in order to return to early retirement life.
With the way the market is performing, I feel like I’m walking through a Fujita 3 tornado with a 150 mph headwind. Every financial step forward is one ass-flattening lurch back.
For those of you who are also secretly losing money during the coronavirus pandemic, I thought it would be nice to look on the bright side of things.
The Benefits Of A Pandemic Stock Market Correction
1) Fewer annoying people, more friendly people.
You know the annoying person who thinks he hit a home run, but was born on third base and wants to teach other people how they can be just as rich if they invest like him? To hell with him! Or how about the guy who claims he retired early while posting pictures of his vacation, but is really a stay at home dad who doesn’t have enough confidence to admit it. Time to get a job ya bum! Or how about the gal who can’t help but brag that she’s making $50,000 a month from her tech investments. Oopsie!
A stock market correction silences the folks who can’t stop telling everyone how much money they’re making every month. Losing money quickly humbles us all. As a result, we should also expect people to get friendlier. From now on, pain and suffering posts will outnumber positive money winning posts 3:1 on FS!
Unfortunately, now that the stock market has rebounded, I’ve got people bragging to me left and right about how much money they made in XYZ stock or bitcoin. Ugh.
2) You finally get to mobilize your excess cash.
Any excess cash past 12 months of living expenses is probably being wasted, unless you’re planning on buying a home or some other large purchase. Excess cash tends to build up due to a lack of discipline or simply no idea what to buy. A stock market correction makes it easier to put your cash to work in stocks.
If stocks correct beyond what fundamentals warrant, you’ll also get stocks at a better value. Cash is fine for liquidity reasons, but in the long run, cash tends to always lose its purchasing power due to inflation.
Make sure you deposit your cash in a high-yielding money market account because you can now get a higher interest rate than the 10-year bond yield. The spread has never been greater.
I ended up investing about $200,000 in the meltdown in March 2020.
3) You’ll get smarter about money.
When times are good, we tend to forget about our investments, our risk exposure, and our financial goals. Why bother when we’re just making money hand over fist?
When the stock market is correcting, we tend to pay more attention to our money because we’re afraid we’re going to lose it all. By aligning our investment exposure with our risk tolerance and financial goals, we’re better able to achieve our goals with more peace of mind. Pain forces you to learn and change.
4) You might stop obsessing over money so much.
When you start losing a lot of money, you tend to start appreciating more of the things you’ve been neglecting for money. When it starts feeling pointless to go to work for money, you may start appreciating your significant other, your parents, your siblings, your friends, and your children more. You tend to hold on tighter to those people and things that are left.
5) You get to fund your children’s 529 college savings plans.
Investing for your children is easier and feels much better than investing for your future because they truly do have a much longer time horizon than you. It’s one thing to tell yourself when you’re losing money to think long term. It’s another to actually have a long time horizon.
I was doubtful about superfunding my daughter’s 529 plan because the S&P 500 was at an all-time high. But now I’m happily contributing during the meltdown because she really does have at least an 18+-year time horizon. Nothing is bringing me more financial joy right now than trying to take care of my kids.
6) You get to more easily fund your 401(k) and IRAs.
People with retirement plans should max them out each year. Over a 10+-year period, you will be pleasantly surprised by how much you’ve ended up accumulating. A stock market correction is a fantastic time to stretch your pre-tax contributions to the maximum.
Below is my handy dandy chart that highlights what the median and average 401(k) balance is by and what you should aim for.
7) Greater discounts everywhere.
The more stocks correct, the greater the discounts you can get when purchasing a car, hiring home labor, buying an air ticket etc. There are so many other things that go on sale when stocks correct. People who feel poorer simply won’t spend as much. Thus, if you happen to be financially secure, you can take advantage of these price discounts.
8) Smaller crowds and less traffic.
The bull market worsened traffic and crowds. It’s been harder to get reservations at popular restaurants and shows here in SF. Paying $1,000 for a regular ticket to watch Hamilton or $500 for middle-row seats to your favorite NBA team is absurd. If you dare venture out during a pandemic, you’ll surely have a lot more room.
9) You get to save lots of money by refinancing your mortgage.
Not only are your real estate holdings outperforming stocks, you have a great opportunity to refinance your mortgages at a lower interest rate. When fear and uncertainty hits risk assets, bonds tend to rise and interest rates tend to plummet. Just make sure not to get a 30-year fixed mortgage if you aren’t planning on spending 30 years paying the darn mortgage off!
Check out Credible, my favorite mortgage marketplace where prequalified lenders compete for your business. You can get competitive, real quotes in under three minutes for free.
10) A narrowing of the wealth gap.
Because the top 1% owns more than the bottom 90% of the world, it is the wealthiest among us who lose the most during a stock market correction. As a result, the bottom 90% should feel relatively richer, thereby reducing social unrest.
11) You can catch up with your peers.
Although you might be several billion dollars closer to Warren Buffett’s wealth, he’s not in your league. Since everything is relative in personal finance, it doesn’t feel good when your peers are making tons of money in the stock market while you are not. A stock market correction gives you another chance to catch up. It may even allow you to surpass them if you were investing in a more stable asset.
For example, in 2018, commercial real estate investors in Fundrise outperformed the S&P 500 by roughly 14%. But then commercial real estate investors underperformed the S&P 500 by 20% in 2019. Commercial real estate investors can take advantage of the stock market sell-off by investing more in stocks to neutralize their 2020 position. As a result, these real estate investors will likely outperform equity investors by perhaps 25% in 2020.
The same logic goes for heavy bond investors who have gladly seen their bond holdings rise in 2020 so far. If they want to change their risk exposure, they can simply sell bonds and buy stocks, or buy more stocks if they have the excess cash.
12) Better work-life balance.
Most people admit to going to work sick because they either feel too guilty staying home or have this relentless desire to make more money by climbing the career ladder. I clearly remember not wanting to miss workdays during the last quarter of each year because that’s when year-end bonuses, if any, were decided.
With the coronavirus, there will be a backlash against employees who come to work with even a slight cough, let alone a fever. Therefore, more employees should be more comfortable taking all their vacation and sick leave days. If more employees took all their sick and vacation days, then its perceived negative impact on career progression should lessen.
When you couple increased pressure not to go to work when sick with a declining company stock price, the end result is a better work-life balance.
13) A chance to improve our healthcare system.
It may cost some people thousands of dollars to get checked out for the coronavirus. As a result, people with less financial means or terrible health insurance plans may not bother to seek medical treatment for illnesses. Therefore, more people will end up getting sick because some of these folks will have no choice but to work sick at their lower-paying jobs.
As people get sicker and poorer, the obvious solution is to have cheaper and better healthcare. Viruses do not discriminate between rich and poor.
Unfortunately, my family is paying a whopping $2,250/month for monthly healthcare insurance in 2021!
14) An increase in worldwide-hygiene.
Supposedly, 30% of women and 60% of men don’t wash their hands after using the bathroom. Further, we all know plenty of people who got to work unwashed for days. What is up with this lack of hygiene people?!
The coronavirus should encourage people to shower more, shampoo their hair more, cover their mouths when coughing and sneezing more, brush their teeth more, floss more, gargle more, and so forth. The United States might even finally adopt Toto Washlet toilets in public lavatories as standard.
It’s nice to no longer feel embarrassed wearing a mask! This is commonplace in Asia. Nobody will ever look at you funny learning a mask any longer.
15) You have a chance to make a lot of money.
Perhaps the greatest benefit for a stock market meltdown is that you get a chance to potentially make a lot of money when the market inevitably rebounds. But to do so, you must take risk and buy.
In my post, Why It’s Harder To Get Rich Off Stocks Than Real Estate, I mentioned an example that I would only buy more Tesla stock if it gets below $700/share. Thanks to the coronavirus-induced meltdown, I’ve been able to accumulate more shares again.
In 10 years, if Elon executes his plan, I’m hopeful Tesla stock will be much higher then. I bought about 10 other names and the S&P 500 index as well. But I always buy more normal when the S&P 500 is correcting more than normal.
There are winners and losers in every stock market meltdown. The winners in 2020 include investments that benefit where more people stay at home or use more cleaning products. These companies include: Netflix, Zoom, Clorox and many others.
Then there are some cities and states that may benefit from greater migration as people flee densely populated cities to work in lower-cost cities with fewer people. The coronavirus pandemic should help support my thesis of investing in the heartland of America.
16) Total deaths are declining!
After more than two weeks of shelter-in-place by many communities around the country, there is a noticeable rejuvenation of life. I see more animals roaming around my neighborhood. Pollution is down. Car accidents are down. Deaths from other infectious diseases are down. Although it is absolutely tragic that people are dying from Covid-19, it is good we are see much less fatalities as a result.
Appreciate The Stock Market Meltdown While It Lasts
If you are able to survive the coronavirus meltdown of 2020, you will be able to tell your children all about it. You will have withstood the quickest correction in history. And if you don’t survive, well, at least you had fun while it lasted.
Hopefully, you guys held on and invested money during the coronavirus-Induced Stock Market Meltdown. The S&P 500 closed up 16% in 2020 and real estate is rebounding.
Related: Predicting A Stock Market Bottom Like Nostradamus
Readers, what are some other benefits of this coronavirus-induced stock market meltdown? Fingers crossed the great vaccine scientists of the world and the central bankers of the world will be able to save us!
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Hey Sam, I just stumble your post from Singapore. This is the perfect post for the perfect time. I am considering to do a refinance for my home right now since the interest rate is all-time low. Not sure if the rates will fall even lower if I wait for another 2-3 months though. But this post really got me thinking. Thanks!
My best guess is that first the trade war and now this will trigger a recession. So, I don’t plan to get really aggressive until I think the Fed stopped cutting interest rates. I could be completely wrong of course, but have 50% of assets in stocks, hedge funds, real estate etc and 50% in cash, managed futures, gold, bonds. So I’m not committed one way or the other really. Lost about 3% in February in Australian Dollar terms. Will be buying more Australian Dollars.
I’d like the help of the readers with this option I’m considering. Should I take a credit card cash advance of $28,000 at 0% for 12 months and invest in the market? It is through Capital One. They would send me a check in two weeks. They have a 2% transfer fee if u transferred a balance from another card which I assume would apply to the cash advance as well. The only reason I am even considering this is that I will inherit conservatively $250,000 from the sale of the family farm to be paid out this fall.
I am 59 with $700,000 in index/mutual funds as of today (post melt down). I put most of my emergency fund in the market already this past week. I don’t happen to have access to any cash except for my paycheck. I regularly put $2,000 to $4,500 in the market every month from my pay, I’m on commission so it varies. I want to take advantage of the low market while it is here. I just don’t have a lot of cash right now. I have $250,000 equity in my home and have even thought about a home equity loan of $50,000 but that may be more trouble than it is worth.
Anyway I’m interested in your thoughts on this. I realize an investment of $28,000 isn’t going to be life changing but it seems pretty low risk with the inheritance coming soon. There will be a minimum payment to manage but I think I can handle it. Thanks!! Bk
You should ask yourself…if you had 28k just laying around, would you invest? If yes – borrow (assuming you will have cash to pay in a year).
A quick point of clarification that may not be needed, I would pay off the remaining balance of the $28,000 this fall with the inheritance. That is why this seems pretty low risk to me.
Thanks
Bk
A little trick I do when the market is crashing is to put extremely low buy orders into companies I wish I have invested in earlier. AMZN at $1200, MSFT at a $100, DIS at 80, BMY at $50. Even though I’m getting crushed this week these buy orders have me rooting for the market to keep going down. It definitely helps to keep you in the game.
I am, like many, one who lost plenty on paper this past week. No problem. I’m so lazy I just do 100% stocks and I never seem to re-balance. Stupid? Quite possibly. But I keep sleeping well at night since I don’t have to do anything or time anything.
It’s the old, “losses and gains are not realized” so I don’t care right now. At least 10 years to go until I will access the funds.
I feel fortunate to have amassed an 8 figure nest egg by my mid 50s. My allocation is aggressive: 80% diversified US and Intl equities, 10% REITs, and 10% muni bonds. I have weathered several market contractions with this allocation. They are always painful (lost just over 7 figures in value this time), but the REITs and muni bonds provide me some nice income and downside protection. I give up some upside potential for sure, but even after this week’s correction, my 10 year CAGR exceeds 10% – I certainly can’t complain. Would welcome everyone’s thoughts on my allocation and ways to mitigate risk going forward.
I guess it depends on what percentage of equities is your net worth? If you’ve found your comfort zone since you’re already in your 50s and if you feel you can withstand another 10% to 20% drop, then keep it the way it is.
I would like to build my equity as a percentage of net worth to about 25% and just stay more or less there. I really love the stability of real estate and the darkness of private investments.
When counting equities as a % of net worth. Does that include bonds and REITs? Or is your 25% only stocks and bonds and reits are considered separate?
I don’t understand. Do you equate equities with fixed income?
What are you doing during this downturn?
I thought that investments in the market was considered stocks, bonds, and REITs. I was confusing the above as being in the ”market”
I rebalanced to a conservative allocation 6 months ago because of reading your blog. I only have $42k in my 401k, but I’m only down 1500 thanks to people piling into bonds last week. Probably going to move back into the aggressive allocation next week because I don’t want to play the timing game any longer.
You got a love the bond performance! So many people have made fun of my municipal bond position on previous posts. But I love how they just keep on chugging along.
It’s interesting though, that I’m always happy for whatever people decide how they want to invest. I never make fun of anybody, just offer her some different ways of looking at things. I’m not sure why people get angry when I invest differently than them.
Sam,
First of all, heard you podcast about lamenting losing money in the stock market while earning money at a job. ARE YOU SERIOUS? DUDE, GROW UP!
1) The first thing you should be saying to yourself is thank God I have a job/income source which is not dependent upon the vagaries and whims of the stock market. There will be times when you’re making good money in the markets while earning a salary, and that feels great. There will be other times, like now, when the market is down and you should be saying, thank God I have a job which pays me regardless of what the market’s doing!
2) Stop overemphasizing the bad times (we’re in now) and taking the good times for granted (some like to talk macho about how they’ll pounce when prices drop..who’s talking macho now?).
3) Making money in the long run is not chess, not even poker. Instead it’s a horse race, and if you’ve been to Saratoga you know how those go. That is, whichever horses started well out of the gate invariably never seem to place most of the time. Be patient and try not to ruminate too much about the currently tough times. Consistent and steady will win the race!
4) Why do you seem to be forgetting about your real estate investments? Mine are paying nicely regardless of what the markets are doing. So unless Multifamily and Industrial/Warehouse becomes impacted by Covad-19 in some serious way, I’m still getting paid.
5) Your point about the wealth gap shrinking due to the market plunge, and making us feel better is pure BS! Post ANY crash, I’ll still only have low millions at best, while the very rich will still have billions (which they’ll never be able to spend in their lifetimes). Don’t kid yourself into thinking we’ll feel better through some sort of financial schadenfreude. The wealth gap is still there!
-LToF
Thank you for your empathy, kindness and advice. I really appreciate it. Hopefully this post is a demonstration of my positive thinking.
If there’s a chance you are feeling bad about losing money or only having low millions, I would just encourage you to keep on working as well. There is definitely a different level of financial security once you get to eight figure versus low seven figures. You just got to do more to protect it from times like these.
If you want to share more about your background and what you are doing with your money in this scenario to help other people, I’m sure we’d love to hear it.
GL!
I now fully realize how difficult it is to be a blogger. I have some random asshole comment like this even after such a positive post and after all the work you’ve put in to do the podcast as well.
Blogging is harder than it looks!
Thanks for helping me get into a positive mindset. I bought some stocks on Thursday and Friday as well. It feels like a good opportunity to me. And I live through the SARS crisis too.
It’s all good! I don’t mind criticism. It keeps things fun. I feel really blessed and I know a lot of anger or criticism is due to something that’s going on with the writer’s life.
We’ve just made so much money over the past 10 years this correction is just a part of admission.
Hey Linda/Sam,
You’ll note that I made no racist or ad hominem attacks.
I thought the idea here was to share personal experience and advice.
You’d do well to focus more on the content, and a little less on delivery.
Since when do I have to agree with you? I mean, really.
Criticism is fine, but share with us what are you doing to benefit. What positions are you taking, how is your net worth structured, where are you on your path to financial independence. This will help other people. What’s the point of just criticizing without opening yourself up to other people’s analysis of you?
I think it’s very clear that many of us have gotten extraordinarily wealthy since 2009, and this correction isn’t a big deal. But think about all the other people who are on the path to financial independence. Let’s try to help them.
The answer is that it’s much easier to criticize others than to open oneself up to criticism.
“No racist” attacks LOL! Dude, you are proud that you weren’t racist in your attacks?
Let me guess, you’re a lonely white male who has no friends let alone a girlfriend or a wife, and definitely is not financially independent.
Just read your original comment again Long Tail, to see why you are a loser.
I respectfully suggest to you that your irony detector has failed in service
Although it seems like the sky is falling the past week, I wouldn’t necessarily call it a meltdown.
The stock market values currently are similar to those values in July of 2019, give or take a few months. Would you have considered piling your money all in at that time and “buying stocks on sale”? Likely not as at that time we were at “all time highs” and hesitant to put more money in.
But now it seems our gauges have reset because the stock market went even higher and now seems like a discount with this latest drop.
While I don’t believe in timing the market on a regular basis….In this particular unusual situation, I switched and moved monies from my index to money market funds in my 401k, Brokerage and Roth this past week. I think at the very least, it’s safe to park and preserve my savings over there temporarily – by 2/27, we had lost everything gained in the S&P index during Q4, 2019. However, I’m going to ensure all future 401K, Roth and brokerage contributions go towards buying the S&P 500. My strategy is to keep buying the dip, and then when the dust settles/we see some stability in the markets, transfer all funds back to the index fund. Any thoughts on this strategy?..
Hi David,
With all due respect, I don’t understand why you would move any money OUT of equities at this time, especially as you are speaking of long-term investments like 401(k). This is not money you intend to spend this year, right? So what if equities crash by 50% (irrationally) right now? We know they will bounce back in a month, a year, or three years.
When you sell in a dip like this, you are locking in losses. When you hold tight, you lose nothing except on paper (or digits on a screen). And remember, whenever you sell, someone is on the other end of that trade, buying. Why are they buying what you’re selling? Ask yourself that.
Trust me, I understand the feeling of hating loss. I have over $1 million in my 401(k) and I “lost” $100,000 last week. But really, I didn’t. I didn’t touch a dime in my 401(k). It’s fine just the way it is, and it will eventually come back.
I have another $850,000 in muni bonds. They are up quite a good bit over the last 12 months. THAT’S where I’m considering selling high, in order to buy MORE equities, low.
I understand it’s really hard to execute like this when times feel emotional, but if you can, try to buy low and sell high. Bonds are high right now (so, consider selling some), equities are relatively low (so, consider buying some).
If you can’t execute this — and it’s not going to be for everyone — then just hold steady by dollar-cost averaging. Meaning, keep buying what you are buying, month after month, and the highs and lows will even out. This is a pretty safe path and what Warren Buffet recommends: diversify into a very broad index and just keep at it, steady Eddy, year after year.
As they say, like a middle aged man’s weight, equity will fluctuate, but generally it goes up :)
Hi Rich,
As I said, I do not time the market from day-to-day or week-to-week. I was invested 100% in equities – fits my risk profile & time horizon. However, in this particular instance, I saw a huge downside risk about 3 weeks ago. I would not recommend my strategy to anyone else, but since I moved my monies from the S&P index to the money market fund, the slide (~5% back then) has stopped. My 401K, Roth, Brokerage have remained stable since then. My strategy has 3 steps: 1. Switch from equities to money market funds, 2. Ensure future contributions continue to buy the S&P index fund during the slide, and 3. Switch back parked funds (Money market to S&P index) once the market stabilizes. I might miss out on 5-10% during the upswing as I wouldn’t know when it bottoms out, but for now i’m not prepared to lose on 25-30%…
Going into this correction, my asset allocation was roughly 30% real estate, 30% cash, bonds, CDs, and 40% stocks but mostly individual holdings. I’m down $1.3 million in the least week. Yikes!
So far I’ve reallocated 3% of the net worth into stocks, but I’m thinking it’s going to get a lot worse. Could this be the time that we head into a recession with the fed having almost no firepower? Equity markets seem like such a facade to me in 2020 but there’s no other game in town other than starting or owning your own business!
David. I moved into Bond funds about a week before to get defensive. Watched bond fund prices daily. I notice a couple days ago long and intermediate term corporate bond funds notched down about half a percent. Seemed a little strange to me because interest rates went down and corporate Bonds fund prices should’ve gone up. On the same day, treasury bond funds moved up. Would you know why?
I’ve spent the last 20 years buying one to two income properties a year. Fortunately, it has worked out quite well.
Thanks to the corona panic, I’m currently refinancing 9 conventional mortgages. I’ve never seen rates this low and I’m locking in cheap debt for 30 years. For some strange reason, the loan for Veterans is 2.875% for a 30-year fixed versus 3.375% for my other loans.
If you were to ask me 4 years ago where interest rates were headed, I would have said they can only go up due to massive government spending. Thank god I did not bet against the bond market. I’m the worst market timer in the world and simply invest money every month.
Call me boring, I simply buy index funds and dribble in money every month in my retirement account. Hoping market continues to drop since my income properties are the perfect hedge against Mr. Market.
I’m thinking about refi as well. My rates were already 3.5 to 4. So only a little to be gained, but am thinking going in 10 yr arm interest only instead. It is kind of hard to give up the security of a 30 yr fixed. Wonder if rates jump in 10 yrs.
Interested in how you can refinance 9 conventional mortgages. Fannie/Freddie limit is 8, and there are rate hits as the number of mortgages increases. A lot of lenders impose overlays with lower loan limits, so finding someone that will do 8 can be an issue.
The rates you quote are for owner occupied from what I see. Where are you finding similar rates for conventional loans on rentals?
Total limit is ten conventional loans. This includes your house. I can Refi 9 loans. The VA loan is a rental now. I occupied it as a house hack for 3 years. The VA offers a streamlined refinance where you don’t need an appraisal and the funding fee is lower than when you purchase.
For my other 8 properties I was quoted 3.5% fixed. It may be lower now since the 10-year dropped again.
I’m using a local community bank. You should shop around. I’ve found the big banks create their own restrictions outside of Fannie/Fredddie guidelines.
Compared to others on the forum ,lost around 45k,as its smaller portfolio , was there in 2008 when it crashed ,lets see where this one ends.Still have some time for retirement
Last week the overall market was down -12% while my self-directed portfolio was down -6.7%. I consider that a winner as it did exactly as intended, a defensive equity portfolio with a beta of .50
Yesterday morning, right on the open I used up my available 10% cash and bought into Carnival (CCL), Royal Caribbean (RCL), Delta (DAL), SW Air (LUV), Parsley Energy (PE) and finally Main Street Capital (MAIN).
I am now 100% Long stocks, mostly dividend-paying companies with a 10% speculative side (hence, my purchases yesterday). I wanted to buy the groups that fell the ost on last week’s headline risk. They have the most upside potential when this corona scare passes. This too will pass…..
This correction has me thinking back as to why I’m so frugal. When so much can be taken away so quickly and I quibble sometimes over small amounts. The saver mindset is good, but at a certain point we should just spend if we can afford it otherwise it can be wiped out in a blink.
Bingo! I agree. Practice taking profits to pay for a better life and life it up more.
This is awkward but here goes. Right before the 2008 crash I sold my entire 401k. I just had a feeling. I got very lucky. I was ready to pounce on stocks at rock bottom prices and instead took someone’s advice to not take risks. I ignored my instincts and a lifetime opportunity to buy back in. Believe it or not I’ve been in cash ever since and watching the boom with dismay (too high to get in now, etc).
Well – I have 350k in my 401k, 50k for my child’s college and 40k besides. All of it liquid and ready to go. I do think the markets will continue to decline.
What would you do?
PS: I have been thinking of using the 40k towards real estate. I have emergency funds and my only debt is a small current mortgage. Coincidentally I made appointments to interview a couple of CFPs before the virus made the headlines. Those calls are scheduled for this week. I’ve gone from feeling like a putz to the luckiest person. Any advice is appreciated!
One big caveat: my employer has a restrictive policy. I can’t invest in individual securities. So mutual funds, EFTs…
Do you think there will a pandemic similar to the Spanish flu in 1919? If so I think a reduced 401K is going to be the lease of your worries with hundreds of millions of people dying around you?
I’m surprised you feel lucky since you have missed out on 300 percent gains over the time you say in cash. A ten percent pull back isn’t that big a deal when you would be up 3x or more.
@Jdcarr21carr: no doubt. I won’t go into the circumstances that prevented me from taking action that would have allowed me to participate in the past decade’s gains. I feel bad enough about it. Any advice, though, now that my head is clear and I can take action?
I’m impressed you’ve been in cash since 2008! If you’re feeling lucky, then you can get neutral equities by buying. You would instantly outperform the average investor who is down 8%+ YTD so far.
I’m a fan of real estate and probably always will be. I do think now is one of the best times to buy real estate, despite the big rise since 2012.
https://www.financialsamurai.com/a-golden-opportunity-to-buy-real-estate-is-upon-us/
Let us know what you decide to do.
Thanks for the positive note and the link.
Retired early, 50% in equity, down 250k last week, braced for what might be another 250-500k correction in upcoming days, weeks, months. Will not need to cash out for another 10+ years (hopefully ever), so who cares. Do not understand what are people scared of unless they need to cash out soon…
All the experts on Fire and vanguard fund geniuses are gone.. yay!! Sam you do a great job..ignore the haters. I survived 1999 to 2001 and slept like a baby all week..this is nothing!! Learn from past corrections people!!!.. The market giveth and taketh away! .. Be happy people ..!!! Portfolio balance is the key!
Why gone? Market is down only a fraction of the gains from last year. I think they are just fine… for now!!
Have you seen you tube the last week…no more experts !!
There’s more downside for equities in my view.
I sold 35% of my equities holdings during September (just to re-allocate) and sold again yesterday another 15% (I know, not the best timing). Over the last decade I have doubled my net worth due to the markets because my income is not very high. And now have lots of cash, waiting.
I am in Europe and they are cancelling everything, all major events etc. (even the Geneva auto convention!).In California they have lost count of Coronavirus cases. ‘
As the market was almost in a bubble we were all looking for an excuse to sell. And now there is a good one in our hands!
During the last crisis of 2008 I held on to equities and saw huge losses. I just never sold and kept it. Like yourself, I promised myself I would ACT this time. And I am glad I did!
I am 20% in equities (50% in cash and 30% in Real Estate) now and don’t plan to sell more. However, I think we have at least minus 10% more to go. I plan to eventually go up to 40% – 50% equities and keep very little cash.
Unfortunately for longs, there’s probably a 60% chance you’re right about more downside risk. I hope there’s not another 10% down to go, but it could easily happen.
Hopefully all of us will still have income coming in where we can take advantage. I will be buying hand over fist if there is another 10% drop.
But I think there’s less than a 20% chance we return to 2008 dire straights. Times are so much stronger.
GL!
Sam – I’ve been reading your blog for a couple years now. Thank you for a great resource. I’ve gotten a lot of value out of it and would like to think you and I are similar minded.
I’m around age 30 living in New York, working in finance. I luckily have about half my net worth in cash at this time, because I was just about to stretch to buy a nyc apartment as a primary residence. (The rest of my net worth is in stocks & lower beta alternatives). I’d be spending the vast majority of my cash on the down payment, and the price of the property was agreed on just before this week’s selloff.
The thesis on this was to finally stop renting and improve lifestyle. I’ve also wanted to own property for a long time given the various benefits. Finally given equity valuations were at the highs (and rates low) in months leading up to now, I liked shifting into a defensive asset with real utility. I agree with your thesis about heartland real estate / outflow from cities but thought the pros outweighed the cons for a primary residence in my case. It took a while to find a property I liked in my price range.
The market dislocation has given me pause in moving forward with this purchase. My income potential will be related to financial markets. I’ve been waiting for a chance to buy discounted equities for a long time. I’m also worried the value of the apartment might go down right after I buy it (although it’s a historically resilient neighborhood).
Wondering if you have any view on whether it still makes sense to go through with this property purchase?
Hi Sam,
Long time reader of yours. Thanks a lot for the excellent blog. I’m very grateful for how educational your posts are – especially appreciate the data you provide to back your positions. How some people are so critic about free top-quality content is beyond my understanding. Also congratulations for having been so successful in creating wealth and providing for your family – I hope I can follow course one day.
I’m 33, not American neither living in the US, making circa 200kUSD/annum, and have a NW of approximately 550kUSD. That includes a 250kUSD fully paid condo, 150kUSD in stocks and bonds, and 150kUSD in cash. i don’t have any debt. I’d like to retire when I hit 50.
My position on stocks is quite defensive (many high dividend paying stocks, natural resources companies, etc) so I’m not being hit too hard by the downturn – I was/am expecting a recession in not too long so didn’t want to get heavily into growth stocks at high valuations. Maybe a mistake considering I still have time to ride the up and downs, I don’t know.
I’m keeping a lot of cash (and increasing) because I wanted to buy property in the US winter of 20-21 – I share your views on the good opportunity ahead of us. With the current dip in the stock market, I feel tempted to invest some of that cash in stocks. What would you recommend? I don’t want to lose the opportunity of buying property soon but at the same time I feel I’m missing on a golden opportunity to buy the S&P500 at a discount. I also think the FED will cut rates again this year which means buying a new condo should be easier.
Any thoughts or recommendations?
Thank you in advance and congratulations again for your blog.
Max
Hi Max – Congrats on your strong finances. If you really plan to purchase property within 12 months away, I recommend you read this post. It was created exactly for your situation.
https://www.financialsamurai.com/how-to-invest-your-down-payment-if-youre-planning-to-buy-a-house/
Oh, and I’m used to criticism from folks on what I do with my money without them sharing back anything about themselves. It’s just the way the internet is. But I do like to know about reader’s backgrounds too, so thanks for sharing!
Thanks for your reply Sam. I think I’ll invest 10-20% of my cash if the S&P500 hits 2600 pts (unlikely, imo). But if I do I’ll force myself to save that additional cash during the next 12 months – no regrets then if things don’t turn out as expected.
The issue I see with cash-accounts these days is that interest rates are and continue to go down so I’m getting less and less for my cash. Trump just urged the FED to lower rates. I wish I had started saving and investing earlier, because it seems like everything is too expensive these days!
It’s perspective. If the market keeps going up over time, in 15 yrs you will be happy you invested. A new investor came to me in 2017 and said the market was too high for him to start investing. with some urging, he invested and was a happy camper to see it grow, knowing prices will come down and it will be another opportunity. Gotta start at some point-dollar cost avg to keep sane.
I’m not FI yet, and I’ve been waiting for a market correction for way too long already. I.e. my portfolio is cash heavy. I’m a typical index fund investor and today rougly 100k down with the current correction and about to start buying (actually started yesterday, but very slowly). However, it feels that we might still be heading down for a while before climing back up? I have not yet seen many statements from companies, how heavily the Corona will hit their revenue and profit. I’m sure AAPL and MSFT are by no means the only ones affected.
For me (and probably for many others as well), it is always super hard to start buying when blood is still fresh on the street. Still, it feels that this is the chance I’ve been waiting for. Any guidance how to get back to market during/after the correction?
I think we can all agree with absolutely certainty there will be plenty more volatility ahead on the downside and upside. Algorithmic trading, the internet boom boxing information louder and faster than back during 2003 SARS, etc will insure this.
I have cash exactly for times like these. When they arrive, I act, knowing I cannot catch the bottom. So I leg in after every 2%+ down day in multiple tranches (5 to now maybe 100+ since you can now buy/sell for free). That’s just my system.
If you’re not yet FI, I think this is a great opportunity to mobilize cash. This is what I’m doing.
Related: https://www.financialsamurai.com/better-investing-figuring-out-how-much-more-to-dollar-cost-average/
Thank you Sam!
I’ll continue my regular weekly purchasing and do additional buying on days when market is heavily down. I almost fully missed the 2018 correction at the end of the year while I waited too long. Now, I need to react quicker.
It’s times like these that we should be thankful for our health we so often take for granted. Did not look at my portfolio since I’ve been following this more closely than most. Had a Chendu trip I cancelled a month ago
Great article and defiantly definitely gives me hope during this stressful time. As a new investor I am trying to be disciplined and realize that this indeed is a buying opportunity to take advantage of. Bought some more BYND today after the dip ;)
Sam,
I really like how you put a positive spin on bad situations. Thanks for the words of insight and wisdom.
—Joshua
Why not, right Joshua? In finance, everything is yin yang. There is always a positive.. an someone is always making money somewhere, no matter the financial backdrop.
The only people worse than stay at home dads who claim they are retired are early retirees with no kids. Where’s the challenge in that? Kids are the ultimate rich person indulgence—all cost and zero to questionable return. They are rally the only luxury items I have and I can barely afford them. There is no limit to how much one can spend on kids.
Fortunately I’m no stay at home dad. My working wife assures me that I’m a trophy husband while I shuttle the kids to and from their activities and help with their homework and projects in between my early retiree life of leisure.
As for investments, I am 50% in real estate and 50% in stocks so the real estate is buffering my losses. I have some cash to deploy, likely gradually going into index funds. I bought on the way down in 2008 but did so too quickly. There is no way I have the courage to sell at the moment since I am really bad at timing the market. I have no idea what the market will do tomorrow. I only know that stocks are cheaper today at than last week.
Haha, nice. I’m envious of your situation!
I hear you on buying on the way down too quickly. My system of buying more on every 2%+ dip has not worked so far. But I still have money behind.
GL to us! The news out of China seems more promising.
I told you in your original article that 2% was too small of a delta. Try 5-10% :-D
Of course you’re did. It’s the internet!
But Investor can control the amount he or she invests on every 2% move. Easy to calibrate!
I responded to this because I found it the most egregious of your others, and like you said, you’ve made this observation multiple times now.
As far as my move, I try not to catch falling knives. I developed a heuristic of buying in after 3 days of gains post-dip. It means I won’t buy the absolute bottom, but I also tend to get in before the recovery.
This situation makes me uncomfortable to employ such a maneuver given the swift drop might align with a similarly swift rise.
BTW – you were born on third base too. You’ve spent most of your working career post-recession.
Got it. Please continue to tell me where I’m making investing mistakes, as I need the capital to take care of my family.
Can you mention some specific names you are buying or shorting? How much in investable assets are you talking about? Hopefully now is a good opportunity and we can all benefit.
I definitely think I was born on third base given I was born Asian and now live in America. I’m not sure how retiring in 2012, two years after the financial crisis ended is being considered born on third base. But I did get totally lucky that the stock market kept going up after retiring.
I know you’ve objected to several of my posts in the past and I really appreciate it. But I forgot your background and stage in life. Can you remind us?
See: https://www.financialsamurai.com/your-wealth-is-mostly-due-to-luck-be-thankful/
Thanks!
Let me guess. Tony is a single, middle aged, ugly guy living in a place like Manhattan, still working, probably with a high income and miserable at his job. You probably were raised by divorced parents too.
How else does one explain being a judgmental jerk? News flash, if you know so much about investing, why are you still working? You guys are such losers, always judging others but never sharing what you do.
Buying Tesla under $700 was good discipline and a good move. Up 15-20% in just a couple days.
Sorry you did not buy the dip. Maybe you will have another opportunity.
Let me get this straight, you think you’re being a disciplined investor by buying TSLA below $700 (but above $600)?
OK
Better than buying at $900+. Phew. Are there any securities you would approve of me buying?
You’re kind of a dick Tony – that’s a pretty passive aggressive comment you’ve got there. Why don’t you share some of your sage investing strategies with us instead of just complaining about Sam. What are you buying and selling right now?
Shorted my entire portfolio last week. Crushed it
That’s awesome. I’m really happy for you. Did you close your position or are you net short into next week? You’re free to share after we see how next week does :)
I have 90% of my net worth in equities and have lost somewhere around 350kish…def feels painful; but what can you do…I’m young and not going to need this money for a very long time so not sure it really makes a difference in the scheme of things….we were extended and this was overdue I suppose.
If you’re young and have around $3 million of your net worth in equities, that’s quite impressive! It definitely hurts for sure, but hopefully there will be containment and a global concerted effort by the central banks to instill some confidence back in the market.