I have been through multiple stock selloffs since I started investing in high school. This March 2020 event has felt (and has been) just as brutal – but then again they all seem that way to me. While no one knows what the future holds, these types of events generally provide a good time to buy. But remember, no one knows the future when it comes to investing.
There have been several, major downdrafts and selloffs in the market since the 1990s. There was the Long Term Capital Management sell off in 1998, the slow but painful “dot com” bust in 2000-2001, the September 11 terrorist attack, the financial crisis of 2008-2009, the 2011 downgrade of US debt, the Fukushima Daiichi reactor blast in 2011, Brexit in 2016, and others. Now this latest event is hitting us in March 2020, which has many causes but the trigger of the selloff is a combination of Coronavirus and oil.
Each time this happens I get anxious, focus (too much) on investment news, and each time I think “the world is going to end”. Those past selloffs often impacted my sleep. For each stock selloff I think “this time is different” and stocks will never recover – I was wrong each time. But you do need to try as much as possible to stay calm, have a plan, and ideally invest more into stocks. I have learned first hand those are the times to buy.
Truth of stock selloffs
No one person or “expert” or talking head on TV knows the future. No one has any idea. They may say buy or they may say sell. It probably depends on the day or hour, as I have sat there time and time again and I see a so called “expert” literally say sell and then the next day it is buy. It is comical.
Of course I can’t tell you what to do. I have no idea if stocks will continue to go down or up as the March 2020 sell off continues. I have no idea if stocks will be higher or lower in a month or a year. All I can say is this is a good time to take a breath and reflect on why you even started to invest. Go back to the basics of financial literacy and the teachings of it. Things like compound interest and how money grows over time. Or the power of 72 when investing, and money doubling based on 72 divided by rate of return.
My advice for March 2020
Take a breath. Reflect. Breathe. Think about your goals and age, as you should always do when considering your fiances. Think about your assets, including stocks, cash, etc. but do not log in to your accounts in March for real time data. It only causes more anxiety and may cause you to panic. Listen to me as I have learned that lesson the hard way!
Generally, if you have emergency savings and have a cash reserve, and if you do not need the money anytime soon, in general it is a good time to buy. But every person has different needs. Remember that financial literacy lesson. It is generally a great time to buy if you are a younger investor, such as a teenager, college student, or high school student. The March 2020 sell off may be once in a decade buying opportunity. As many of those past events have been.
Most important, do not panic. But be thoughtful during this stock sell off. Try to take an objective appraisal of yourself; your age, total assets, and financial situation. Try not to be emotional, as when investing you need to limit emotions and ideally be unemotional. Anyway, good luck, breath, and go slowly.
By Jon McNamara