Checklist for circumstances beyond control
By Joel Dresang
I am trying again to write about COVID-19 in relation to my investments.
I started writing after the latest coronavirus outbreak was blamed for a Wall Street panic that plunged stock indexes to their swiftest 10% pullback in history. Investors seeking sanctuary in bonds sent the bellwether 10-year Treasury yield to an all-time low. The Federal Reserve made an emergency cut in interest rates, even as it declared the U.S. economy fundamentally strong.
Then I revised what I had written after the World Health Organization declared the virus a pandemic and stock prices dropped so far they kiboshed an 11-year-old bull market.
Now I’m taking another stab at it after COVID-19 became a national emergency, the Fed essentially has pledged to do whatever is needed to help and stock trading was halted for the fourth time in two weeks.
In my earlier versions, I got to write that the novel coronavirus hadn’t affected me directly as much as the dengue fever epidemic in Paraguay, which had more cases at the time, including one of our daughters, who’s a Peace Corps volunteer.
Since then, the school where my wife works has closed, we canceled plans to visit her mother in Florida and the Peace Corps suspended its operations worldwide, which included evacuating our daughter.
Initially, I wrote that despite my concerns about dengue and COVID-19, the turmoil in the financial markets had the greatest impact on me personally. Now, I’m not so sure.
All of these disruptions, though, remind me that there is only so much I can control.
Of course, the decline in stock prices is messing with the money my wife and I are setting aside for retirement. However, because we are not yet retired, even the convolutions of our investment portfolio are somewhat removed from having a direct hit on our day-to-day well-being.
And even if we were retired, we need only a fraction of our savings from one year to the next, keeping us entrenched as long-term investors.
What I can do about dengue or COVID-19 or the financial markets is frustratingly peripheral. I know that it’s only human to want to do something, though, so here are some actions I have taken, with specifics on investments:
___ 1. Assess the situation as objectively as I can and determine how it affects me.
I don’t dwell on my account balances—especially when I know the markets are down. Similarly, I don’t gape at car wrecks when I should keep my eyes on the road. If not to inform my writing, I would have avoided checking in on my accounts until after the dust has settled. When I peeked, I found that the mix between stocks and bonds in my retirement account is about where I set it two years ago. Of course, I noticed that our account balances are lower than they were at the beginning of the year and even a year ago, but not as much as the major stock indexes. The farther back I look, the better off we appear, especially thanks to continuing contributions.
___ 2. Remind myself what I have done to protect myself from what has happened.
I trust that my investment allocation is diversified enough that I don’t have all my eggs in one basket and that it’s balanced between equities that can grow for the longer term and fixed income safely set aside for more immediate needs. While the headlines decry the volatility of the Dow Jones Industrial Average and the S&P 500, I know that my holdings are more varied and contain bonds and other investments whose values are supposed to move in the opposite direction of big-company stocks.
___ 3. Learn more about the situation.
I have upped my daily reading, seeking out a variety of perspectives in publications such as The Wall Street Journal, The New York Times, The Washington Post and The Economist. I’m not looking for just the news of the day but analysis and perspective. I’m reading from economists and columnists and journalists who have a history with what they’re writing. Often, their work leads me to look up further information on what I have learned.
___ 4. Talk about it.
Misery loves company. I benefit from the shared experience of others. I’m fortunate to work with professionals who regularly discuss market volatility and what it means to investors and what they should do. I sit in on staff meetings that emphasize listening to investors, empathizing with them and reminding them of the possible perils of abandoning long-held plans based on emotional reactions to current events. I participate in weekly podcasts aimed at informing and assuring investors.
There’s no telling how COVID-19 or the latest stock sell-off will figure into my life six weeks from now, let alone in six months or six years. I only vaguely remembered the 2003 SARS coronavirus epidemic. I usually have to look up the last occasions of stocks having corrections of 10% or more.
Other Money Talk articles from Joel Dresang
Another item to add to the check list of what to do when I feel out of control is a corollary to Item 2. Besides considering how I’ve arranged to protect myself, I should think about how better to defend myself the next time—which begins with anticipating there shall be a next time.
Before a major surgery years ago, I was told by my doctor to be in good shape. He said my fitness would make his work easier and aid my recovery.
I embraced that prescription as if my life itself depended on it. Of all that I could not control surrounding my condition or the doctor’s skills or the medical professionals assisting him or the technologies involved, I could watch what I ate, and I could exercise.
Whether that helped my surgery or recovery, I can’t be sure. But doing something—involving myself in what little ways I could control—was a healthy distraction from worrying.
Joel Dresang is vice president-communications at Landaas & Company.
Keeping balance in unnerving times, by Bob Landaas
A note on coronavirus volatility, by Kyle Tetting
Headlines only part of stock market story, by Kyle Tetting
Making financial sense of “breaking news,” a Money Talk Video with Art Rothschild
Why investments outperform their investors, a Money Talk Video with Kyle Tetting
Corrections: A normal part of investing, a Money Talk Video with Marc Amateis
Volatility: Stock market vs. your portfolio, a Money Talk Video with Kyle Tetting
When Should I …rebalance my portfolio? by Art Rothschild
Latest updates from:
The World Health Organization
The Centers for Disease Control and Prevention
(initially posted March 27, 2020)
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