So it’s being a crazy couple of weeks. News around the Coronavirus are all over the place. The market is a rollercoaster on its way down. Russia and the Saudis are playing heads up and the question is how long the bluffing will last. Meanwhile, the US Oil & Gas sector continues to take a punch.

If you jump on twitter or any social media platform, you’ll read comments from almost every personal finance blogger saying that it is during times like this that you should stay the course and avoid changing your long term strategy. I don’t disagree with this statement but it is certainly easier said than done.

Yes, you should avoid looking at your personal capital account or brokerage accounts but it is difficult to avoid the temptation.

It has been painful to see the reduction in value (not loss) of our positions but at the same time, we’re trying to tell ourselves … this will pass!.

For the past couple of years, you’ve heard people saying the market was overpriced and that a correction was inevitable. Now, I don’t think anybody could have predicted the Coronavirus would be the trigger for a market correction.

A Market Correction

Recommendations on building portfolios based on your risk profile and having a long-term mindset to take emotions out of the equation was a key message voiced by personal finance bloggers.

The reality is different. Even when you prepare for the unexpected or in this case the expected, people still freak out and do dumb shit.

The S&P 500 has dropped from a high of ~3,390 around mid-February to ~ 2,700 (march 2020). That is roughly a ~20% decrease up to date. Will it be higher? Who knows.

If you’re one of those that follow the popular advice of putting all your money on VTSAX then you’re probably feeling the pain 🙁 .

Not that you care but below is a screenshot from personal capital. No need to show detailed numbers but you can see that my portfolio has dropped 15% in value. Since I haven’t sold any of my positions I haven’t realized any losses.

Ok, so what am I exactly doing to navigate the craziness we’re seeing in the market?

Contributions to Roth IRAs

In 2019, we decided to not contribute to our IRAs. For one, we thought the market was overvalued, and two, the drop in interest rates made the acquisition of a rental property a more appealing option.

We didn’t have any line of sight on getting a rental property. I re-engaged two turnkey real estate companies I had done business in the past but honestly, I was not in a hurry. Meanwhile, our capital was sitting in a high-interest savings account to make sure we had access to the funds.

When the market started dropping in February, we had conversations about what we should do. Ultimately, we decided it would be best to contribute to our Roth IRAs. The market could certainly continue to drop but we were comfortable making our 2019 and 2020 contributions.

I can’t tell you what 2020 or 2021 is going to look like but having cash on hand proved beneficial.

Let me be clear, we DO NOT believe in timing the market; however, having liquidity helped us take advantage of a 20% discount with the recent drop in the market.

We’re not sure if we’ve hit bottom but better to buy now than in 2019.

Investing in Brokerage Account

In 2019, we decided to move our funds from Betterment to Vanguard. Nothing against Betterment but we felt it was time to move on. I detail the process here so check it out in case you’ve been thinking about making the switch.

Betterment usually starts you with a portfolio of a few Vanguard funds; however, based on market movements they may add funds for tax-loss harvesting purposes.

At the time of our transfer, we had a total of 19 ETFs. I don’t know about you but that is a lot.

When the funds hit our Vanguard account, we simplified our portfolio selling some positions and parking the settlement funds in a money market fund offered by Vanguard.

We decided to hold off from immediately deploying the capital and, as a result, funds remained uninvested for the last two quarters of 2019.

Watching the market grow during that period was painful. The S&P 500 rallied from 2,923 in May of 2019 to 3,230 right before the end of the year.

We had just missed an ~11% growth (not including dividend re-investing) staying on the sidelines waiting for a “potential” market drop. FOMO was the real deal.

At the beginning of 2020, we decided we needed to put that money to work but for whatever reason (dumb luck), we held off.

In hindsight, it seems like we made the right call by staying put but in all honesty, it was a bad decision. We simply got lucky.

Once the market experienced the first major drop we started to Dollar Cost Average (DCA) our way into deploying our cash. Research suggests that long-term, lump-sum investing beats DCA but for us, DCA proved to be a better option. We purchased index funds at multiple low points.

Increasing Our Emergency Fund

In the past, I’ve written about our decision to not have an emergency fund. Today, we view things differently.

We now have ~12 months of expenses parked on a high-interest savings account paying ~1.7% APY. The drop in interest rates hasn’t helped but at least we know we’re making some money instead of speculating with other types of accounts.

But what if the market tanks or experiences further drops? Should you tap into your emergency fund?

The answer is not straightforward for us. We may consider adding more funds to our brokerage account but for now, we want to avoid that temptation.

If the market has additional drops, it could turn into a phenomenal opportunity to buy at a discount. If we are right (we won’t), we could increase our net-worth significantly.

But what if we are wrong? what happens if the economy gets worst? What if I lose my job? Then what?

For those reasons, we’d rather play it safe (for now), have cash on hand and add some more cash to our emergency fund if possible.

Deleting Social Media Apps

There’s so much stuff going on social media that I decided it would be best to just turn the volume down.

I was saturated by all the comments from personal finance bloggers about the stock market, what you should do, what you shouldn’t do, etc.

Given the temptation of jumping on Twitter or Facebook and leaving comments and replies, I finally pulled the trigger and deleted both apps on my phone. It’s been a couple of weeks and it really feels good.

Once the craziness goes away I may bring them back but for now, I will enjoy the break.

Final Thoughts

I’m NOT going to tell you:

• Leave your emotions out of investing
• Take advantage of the market drop and start investing.
• Control what you can control.
• Focus on the long term and avoid short term shifts in your strategy.

I’ve shared how we’re navigating market volatility but this is what WE feel is right for us. You get to decide what is right for you.

What I will tell you:

• Acknowledge your emotions when considering a change in your investing strategy.
• We don’t know if we’ve seen the worst of it. Ultimately, forget about timing the market.
• Having cash on hand was beneficial; however, I don’t recommend sitting by the sidelines.
• Consider maintaining an emergency fund.
• Money is certainly important but for us, family and health come first.
• Protect your family and care for one another.
• COVID-19 is real, take the necessary precautions and do not underestimate the risk of infection.

Until next time … JJ