We live in unprecedented times and are treading through unknown territory as the threat of COVID-19 continues to wreak havoc across the globe.
The coronavirus pandemic has sent the world’s economies in a downward spiral. Stock markets have been upended. Businesses have ceased operations. Factories and plants are shut down. Under normal circumstances, instinct would tell us that now is a good time to buy. The rules of the game would tell retail investors to take advantage of this drop.
If the health crisis did not have an adverse effect on our finances, we would still consider looking for the best mortgage rates in cities like Meridian or Boise. We would still look at options on how we can further diversify our portfolios.
We Were Not Prepared for This
The truth is, no one was prepared for this situation. Nobody saw it coming. Sure, some experts had some sort of forecast about things to come, but they did not imagine it would be this bad.
Dow Jones industrial average hit its lowest in three years and went down 30% in just one month — it’s steepest ever — to levels even worse than that of the Great Depression. The sad news is, this pandemic is far from over. We haven’t even seen its ugliest yet. Most of us have not yet come to terms with how much worse things can get and how long it will still take.
What Should We Do?
Despite all the indicators, experts agree that you should not make any changes to your portfolio. As long as it is properly diversified and you have a sufficient cash source, you will be fine. However, adapting to the present circumstances will have to do with your age and what your financial status is.
For the Young Ones
If you are still young, you still have enough time — decades, actually — to recover financially. This is not to downplay the current situation. The most important thing at this point is to sustain yourself and your household during this time. You’ll just have to suck it up and endure it until things get better and you start making a financial recovery.
One thing that will work best for you given the present circumstances is if you have emergency funds set aside for the rainy days because we’re experiencing a downpour right now. If you were not able to set aside funds to carry you through these hard times — perhaps you haven’t been able to save, have been laid off or furloughed — you may want to consider taking extreme measures.
For Those Who Are Nearing Retirement
If you are a few years away from retiring, you may want to build your cash reserves even if it takes selling some of your assets. This could be considered as part of, if not your entire, emergency funds.
If you’re looking at spending all that cash within six months to two years, avoid investing them in stocks as a lot of things could happen in two years. You may also want to consider holding off on your retirement for about a year or two to allow you to financially recover.
For Those Who Have Already Retired
Retirees who have substantial cash reserves should use cash to pay for bills and consider stopping income on investments. As much as possible, don’t sell investments during a downtime like this if you can afford it.
If you don’t have any access to a significant amount of cash, you may use your pension and other benefits from your Social Security. However, if you don’t have both, then take an honest assessment of your situation and do whatever needs to be done to cut down on your expenses, even if it means moving in with family.
These are extreme days and these times require extreme measures. Some of us only need to make slight adjustments while others need to make drastic changes in our lifestyle. At this point, we have to do whatever it takes to see this through. Brighter days are up ahead but we have to brace ourselves for the worst as we look forward to the best.