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Wash Your Hands

If I can only offer you one piece of advice to navigate the current crisis sweeping the markets, it is this:

Wash your hands. 

Public health experts, scientists, and doctors all agree, the spread of coronavirus will be greatly diminished if we all simply wash our hands as thoroughly as possible.

This is a proven fact, whereas the rest of my advice for navigating this crisis is simply based on conclusions I’ve been able to draw from spending my entire career advising other people on their finances.
 
Make sure you have enough cash on hand to survive at least another 12 months of severe market volatility.  Investors didn’t lose money in the past downturns solely because asset prices fell…they lost money because they had to sell at the wrong time.

Enter some limit orders for stocks or ETFs you’ve wanted to own for a while but thought were too richly valued.  Enter them way below the market. It costs you nothing and you may end up owning something at a fire sale price without even realizing it.

Rebalance.  Your bonds are up a bunch in value and your stocks are down a bunch in value. Buy some stocks and sell some bonds.

Don’t invest like it’s the end of the world.  The end of the world only comes once and I’m fairly certain this isn’t it.  If this is it, then none of the advice anyone can give you will matter anyway.

Short something if you’re feeling lucky.  But only if you’re feeling lucky.  Shorting is way harder than buying…we’ve covered that before. Shorting something now and getting your face ripped off in a 5% up day rally like yesterday will remind you just how hard it is.

It’s never too late to do the right thing.  Have you been overly conservative and waiting for a point to jump into equities? Now is as good a time as any with markets down over 15% and bonds at all time highs. Have you been overly aggressive and waiting to get out? Now is as good a time as any with markets at higher levels than they were 9 months ago and valuations pretty full.

Nobody predicted this. I read every major market update coming into this year and no one had “global pandemic accompanied by sub 1% interest rates across the Treasury curve” as an even remote possibility.  Sh*t happens.

Uncertainty = risk.  Risk is the idea that more can happen than will happen.  At times of great uncertainty, risk feels higher (even though it isn’t!) because there are so many more and varied outcomes that can take place than what we originally realized.

But actual risk is at its highest when perceived risk is at its lowest.  Just three weeks ago, we were trading at all-time highs and very few people had even heard of COVID-19.

Markets overshoot in both directions.  Everything seems crazy ex post facto but we don’t know what level constitutes crazy until hindsight kicks in.

Forced selling breeds desperation.  Desperation leads to lower prices. Lower prices lead to panic. And on we go…

Bonds seem really expensive at the moment.  I said the same thing last week and they’re up even more since that post came out. If you’re ok with a 1% return for the next 30 years then a diversified portfolio probably isn’t for you anyway.

Tip well.  The person serving you, picking up your car, or cutting your hair is probably having a pretty rough go of it right now. Make their day and support the economy all in one fell swoop…
 

And then wash your hands.