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Tempe Office

222 S. Mill Avenue

Ste 800
Tempe, AZ 85281

COVID-19 RESOURCES

The world is watching with concern the spread of the new coronavirus. The uncertainty is being felt around the globe, and it is unsettling on a human level as well as from the perspective of how markets respond. 

As you know, the last several weeks have seen some of the most prolific declines in the history of the stock market. Your portfolio has been hit, my portfolio has been hit (my invested portfolio is built with the same funds I recommend), and any investor who's built a sensible longer-term strategy would have been hit.

Do we think we'll bounce back?

Of course. We're not betting on the end of the world.  

The bounce back will start to happen when we think things can only get worse.... that's how it usually works. 

Still, it's been painful and we've built this page to help you through it. For specific guidance you can always schedule a call

SHORT TERM VOLATILITY

SHORT TERM VOLATILITY

The financial markets don’t like uncertainty and the current coronavirus outbreak is no exception, and many investors are tempted once more to “do something.” But in times of volatile markets, the best move of all for long-term investors is often no move at all.

While they’re not exact parallels, the stock market responses to the SARS coronavirus in 2003 and the Zika virus in 2016 offer useful lessons. In both cases, investors who sold on bad news and falling prices missed significant rebounds that very shortly had stock markets back to prior levels. There’s no guarantee that today’s market will play out the same way, and these past pandemics did not screech the economy to a halt the same way this current crisis has.... But remember that knowing when to get back in is just as hard as knowing when to get out. The investment strategy I’ve mapped out for you is a long-term plan based on your personal goals and circumstances. Should those change, let’s talk about whether an adjustment to your strategy is warranted.

THE MARKET HAS A HISTORY OF UPS AND DOWNS

THE MARKET HAS A HISTORY OF UPS AND DOWNS

Still, this is unprecedented. 

...But when Lehman collapsed it was also unprecedented.

...So were the 9/11 terrorist attacks

...So was the 22.6% crash we saw on Black Monday in 1987

We now have the luxury of those declines and the subsequent market response to aid in our decisions. This is why we have confidence in a future rebound. 

The recent retraction into a bear market was the quickest in history, taking only 19 days, and it was the first pandemic-driven bear market.

We have to learn from history to navigate the future. While past performance is not indicative of future results, predicting the future without an appreciation of the past is a recipe for failure. 

The chart to the left shows the S&P 500 index over the last century of bull and bear markets. We must appreciate this history when crafting an approach going forward. 

AVOID UNPLANNED REACTIONS

AVOID UNPLANNED REACTIONS

The impact of missing just a few of the market’s best days can be profound, as this look at a hypothetical investment in the stocks that make up the S&P 500 Index shows. Staying invested and focused on the long term helps to ensure that you’re in the position to capture what the market has to offer.

This chart shows the annualized compound return of the S&P 500 Index going back to 1970 and illustrates the hypothetical impact of missing out on just a few days of strong returns. 

A hypothetical $1,000 turns into $121,353 from 1970 through March 17, 2020.

Miss the S&P 500’s five best days and the return dwindles to $77,056. Miss the 25 best days and that’s $26,989.There’s no proven way to time the market—targeting the best days or moving to the sidelines to avoid the worst—so history arg

Ducking in and out of the market is akin to market timing, and that is difficult because a substantial proportion of the total return of stocks over long periods often comes from just a handful of days. Since investors are unlikely to be able to identify in advance which days will have strong returns and which will not, the prudent course is likely to remain invested during periods of volatility rather than jump into and out of stocks. Otherwise, an investor runs the risk of being on the sidelines on days when returns happen to be strongly positive.

*Hypothetical. For educational purposes only. 

THE DEFINING MOMENT FOR INVESTORS

Let's pretend for a minute that it's the year 2025...

You’re looking back at the CoronaCrash of 2020, the massive losses it dealt to your portfolio and how you reacted as an investor.

Just as we reflect on prior crashes, our accounting of what happened will contain phrases like “Of course ______ happened…” or “Clearly it was going to be a big deal...” or “Everybody knew that…”

In your brain, the crash of 2020 won’t be an accurate recollection of what it seemed at the time, because right now it seems irreducibly scary and uncertain. Time will pass, certainty will be given, and our fears will subside. That's how it works. 

In 2025 I'll be advising clients, some of them old and some of them new and during discussions we will reflect back on what decisions were made right now.

Did we completely sell at a 30% loss?

Did we buy?

How close were we to the bottom when we bought?

When we sold with the intent to get back in, how much of the rebound did we miss? 

... When meeting new potential clients I often ask about their experience through the Financial Crisis and, more recently, the 20% decline in late 2018. What did they do? How did they feel? Etc. But from here on out, this current crisis will be the defining moment for all of us.  

Everyone agrees that 2009 or 2010 would have been the best time to buy stocks in a generation, but very few investors actually did. 

Why is that?

...Take your pulse right now after watching the news for a few minutes.... THAT'S WHY.

It's scary. 

Now I'm not saying that this is the bottom of this market or that you should rush out and buy stocks right now --after all, this crash has been the most unpredictable, rapid and unprecedented decline by almost every modern metric. But we should acknowledge the above and try to determine where we fit into history. 

Over the course of the last month I've presented a lot of data and charts and encouragement that this will get better eventually. In fact, my own confirmation biashas me seeking out third-party research and opinions to support this belief. I see the negative stuff too, but I refuse to give in to fear. To be clear, my opinions and theses are optimistic in nature.


I believe things will be okay.
I believe the ensuing rebound will be prolific.
I believe good things can come from crises. 

I have to keep this disposition because (1) it would have been the right attitude to have in every prior decline and (2) there is very little good news these days and I'm doing my part fo balance things out. 

My conversations over the last couple weeks have ranged from clients saying,

"How can I save and invest more while prices are low."

to

"Halt all future investments and turn my portfolio into cash."

These responses --and any in-between-- are all perfectly normal and human and justified.

If you're panicking, that's okay.

If you're scared, that's okay.

If you're mad, that's okay (even if you're mad at me... more on that below). 

If you're optimistic, that's okay too.

I'm not here to tell you how to feel, but to try and be a sort of "release valve" during a crisis situation. If it were solely up to me we'd stay the course, use excess cash to buy into the hardest hit part of our portfolios, and continue making moves to optimize your tax situation (tax loss harvesting, roth conversions).

Usually we can help to decompress the situation if we just talk and remind ourselves of our investing principles and why we are invested the way we are.