Lockdown will be a new experience for most if not all investors. Based in the UK, I have pretty much been housebound for over a week, apart from the occasional trip to the shop or for a walk. Fortunately, I am able to work from home so my productivity has not been impacted much. As the Coronavirus continues to wreak havoc across the World with increased intensity, here are my top tips for the Intelligent Investor.
Polish up you CV and Skills
It is no secret that, across the board, all types of companies, big and small, have been affected by the Coronavirus and are looking into different ways of mitigation. This may impact employees through reduced hours or pay, forced leave or redundancies.
In such times it is very wise for the employee to be prepared for the worst by getting their CV up to date, improving or learning new skills and have a Plan B. It may not be easy though as hiring may be scaled back or stopped in certain sectors.
Have a Low Information Diet
The worst thing about being stuck at home is that you will probably end up watching/ reading a lot of the news which ends up making you even more depressed. For investors, too much bad financial news may cause one to act irrationally.
Personally, I know a few people who were happy when the bull market was raging recently but are now either rushing to sell or hoping to stop investing when previous valuations are restored. Selling now will crystallize your losses forever. Instead, it is best to not check your portfolio frequently, stay the course and hold firm.
When I did my regular quarterly update my portfolio is down 18.33% so the net worth chart below looks bumpy. It may look like an entire year’s progress has been wiped out but it is a a good time to buy. My progress to Financial Independence has been scaled back but I will keep investing.
Keep buying stocks consistently
It is undeniable that Coronavirus is unlike anything investors have ever experienced. Even Warren Buffett said he had never seen such an event in his lifetime. The virus has touched every aspect of life from the housing market to visiting family. Unbelievable; even last month who would have ever thought that you would be never be able to move house or go to the local park.
The one thing to do now is to be consistent at buying stocks, preferably low cost index funds. This may be an opportunity of a lifetime for investors with a long term view, particularly if stock prices remain low for a prolonged period. When things recover, those who have been piling into the markets will reap the rewards.
Look out for the silver lining
It is also important to have a positive outlook. Not all bad things have to end up that way. If we get through this situation then there may be other opportunities to be had. You just have to be in the right place at the right time so it is worth thinking about any potential benefits in future.
A number of great businesses were born during scary recessions of the past including General Electric, Microsoft, IBM, Disney and FedEx. Necessity is the Mother of Invention.
You may be finally finding out in shock that your job or business can go at any moment. It is best to have some resilience. A level of Financial Independence can also help mitigate any financial hits.