Buzz
My Vanguard portfolio saw a drop of $9,371.70 over the last month, with most of this loss occurring in the past week.
I didn’t lose my composure—and if you're facing a similar situation, it’s likely best not to overreact either.
As Money.com points out, if you're a Millennial investor (like me, I'm 38), you've just gone through the toughest week of your entire investing experience.
The stock market just experienced its largest one-week drop since 2008. For many millennials—who were graduating college around that time—this marks the most significant decline their portfolios have ever endured.
However, none of these losses are permanent unless you decided to sell your investments right after they fell. Investing is a long-term endeavor, and as a Millennial, you’re still in the midst of it. The buy-and-hold strategy remains a strong approach, and right now, stocks are definitely on sale.
But what if you’re not a Millennial? What if you’re nearing retirement and worried that we might be entering a recession, causing your portfolio to struggle to recover before you need it? Well, Money.com still suggests holding your ground for as long as possible:
If your asset allocation is aligned with your goals—and, importantly, your time horizon—and you have an adequate cash reserve, then the best course of action is to do nothing,” says
Timothy Wyman
, a certified financial planner and managing partner at The Center for Financial Planning in Southfield, Mich.
In this case, the cash reserve refers to enough money to sustain you, so the rest of your investments can remain in the market until recovery begins. An emergency fund is a useful tool here, especially if you're not currently earning income from another source (and if you’re nearing retirement or preparing for FIRE, having at least a year's worth of uninvested cash available is a smart move—so... start working on that alongside your other financial goals, I suppose).
My emergency fund/cash reserve is currently sufficient to cover four months of expenses, which leads me to wonder if it’s wiser to invest the funds I’ve set aside for my brokerage account or keep them in cash. (I’m not questioning whether I should stop maxing out my Traditional IRA, SEP IRA, or HSA. These accounts provide some of the most significant tax advantages I can get as a freelancer, so I’ll continue contributing to them regardless of market movements.)
I’ll likely choose to invest the funds set aside for my brokerage account; stocks are still discounted, I have a long enough time horizon to endure any discomfort, and I trust my ability to earn more in the future even if we do end up heading into another recession.
That said, I’m not a professional financial advisor, and this should not be considered investment advice. So, let me turn it to you: what’s your approach to your investment portfolios after last week’s coronavirus market drop? Are you buying? Holding? Increasing your cash reserves? Sticking with your strategy from two weeks ago?
After all, stocks went up again today—and we’ll have to see what they do tomorrow.
