Coronavirus and Your Portfolio: Part 3

Personal Money Planning |

Last week I tried to put the market issues surrounding the virus and the virus itself into context. While I am sure that several thousand will die as a result before this is over, context shows that in the United States alone, the 2017-18 flu season saw 80,000 deaths and 2018-19 wasn’t much kinder with 60,000 deaths.

Yet even in context, this is a big deal for China, for both its internal politics and its economy. I truly doubt they bounce back quickly, but they will bounce back. The same is true about the after-effects of the virus on the rest of the world.

What, then, should you do with your investments? Pretty much nothing. Well, not unless your investments were messed up to start with. If you are saying to yourself, “But I have to do something; I can’t stand to see my portfolio take a 10% (or 20%, or 30%) loss,” then I can tell you that your investments were messed up to start with.

That’s because what the markets are doing and will do is quite natural to them. If new information becomes available (like a virus), then it will either go up or go down depending on whether the composite thoughts of investors think that the new information is good or bad.

The market(s) are always reacting. That is a given. Sometimes those reactions are large, sometimes they are violent, and sometimes they last a while. It’s pretty hard to get in front of because you don’t know what is going to happen next.

What I can tell you is that if you can’t stand for your portfolio to take a significant loss, then your portfolio is not right for you. Either the problem is concrete (you’ve got your kid’s college money all in the stock market and they are a senior in high school) or imaginary (you believe that if you don’t sell out now you will lose all of your money). Both are indeed problems, but not problems because of the crisis du jour, they are problems in matching your portfolio allocation mix to your needs and your psychological tolerance for risk.

It’s not like I haven’t mentioned this before.

One thing that is new is that there are a lot of bad players making good on this virus through scams and such. That there are scams is not new…the are just onto a new topic to scare you into doing something that is good for them and not for you.

The SEC issued a warning that there are a number of Internet promotions, including on social media, claiming that certain companies’ stocks are going to soar as they have a cure to the virus in the works. These are a form of “pump and dump” where the writer owns the stock and is trying to get you to buy it causing the price to go up so they can sell it at a profit.

You’ve been warned.

 Gary Silverman, CFP® is the founder of Personal Money Planning, LLC, a Wichita Falls retirement planning and investment management firm and author of Real World Investing.