Finding Calm Before, During and After The Storm
How to survive a pandemic and save your assets in the process, even if we’ve never experienced anything like this before.
Yes, I know this feels different, and in many ways it is. But that does not mean we won’t get through it. We will absolutely get through this and your portfolios are specifically designed to protect, preserve and even grow…before, during and after corrections, recessions, pandemics, and whatever else is thrown at us. By responding, rather than reacting, you ensure the smoothest and quickest path to recovery.
Here are the three most important things I want you to focus on:
- Perspective
- Process
- Patience
Perspective:
All of us should be laser focused on stopping the spread of this virus. We should be supporting our health care professionals and heeding the advice to practice social distancing. Beyond that, we need to help our local communities by supporting small businesses and workers who need a regular paycheck to survive.
I’ve been amazed and uplifted by the speed with which everyone in my sphere has been able to stay open by making rapid changes to adapt to the new normal. I’m working out of my home and meeting with clients via Zoom. More perspective; we have access to power, food, fuel and many of us will remain operational with little or no interruption. We are among the fortunate ones.
With so much uncertainty and a rapidly changing terrain, it’s important to focus on what your immediate needs are. Do you have income? Will your business be interrupted? Focus on taking only what you need for the next two weeks and then reassess after two more weeks. So much will change over the next several days and every week, every month will reveal more about the direction of the recovery. There will be a recovery, I promise. I just can’t tell you exactly when.
Process:
I can’t stress enough, how important it is to trust the process. If you’ve seen me in the past year or so, we already have a plan in place based on whether you are in the Accumulation or Income Phase (Accumulation vs. Income) This document will help explain the difference between the two phases and outlines some of the strategies we can employ to reduce the need to sell anything during a correction. That’s the goal, to not have to sell low at an inopportune time.
Each and every one of you has a portfolio designed to absorb these occasional shocks to the system. The natural instinct is to try to prevent further damage by selling and converting everything to cash. The problem is your portfolio is made up of shares of investments not cash. This piece (Shares vs. Dollars) helps explain the danger in selling your shares prematurely.
I know it’s difficult to believe, but your portfolios are working hard for you, even now. If you are years from retirement, the income being produced is buying up some really cheap shares on sale. If you are retired and taking distributions, you are likely using the income to satisfy your withdrawals and there’s no need to sell anything. Another strategy might be to withdraw monthly, vs. yearly, to ensure you are “dollar cost averaging” out, the same way you contributed while you were working.
By having a well diversified portfolio, we are in a position to turn these mechanisms on and off depending on the stock market environment in order to maximize its capabilities. The ultimate goal is to have enough growth and income to last your lifetimes, and then some. That is always my goal. And in the 19 years I’ve done this work, there’s never been a time where this was not the case. Your portfolios have been growing and creating all the income you’ve needed to fund your needs and desires. Every portfolio has been doing everything we’ve asked of it, even through the Great Correction in 2008. Trusting the process means using the tools at our disposal to preserve, protect and grow your portfolios in good times and bad.
Patience:
It sounds cliche, but I promise…this too, shall pass. And that’s a good thing! The one thing you can count on, in both life and the stock market, is that nothing stays the same. Things will likely get worse before they get better, but we will always recover. In fact, there has never been a time when the stock market has not recovered eventually, in time.