What strikes me most in hindsight about my reaction to the current coronavirus market crash is that at first I didn’t even notice it. It took me literally a few days to learn the market was nose diving.
Do I live in total isolation, you might wonder? I don’t – I go to work pretty much every day, spend time in the twittersphere and have a husband and friends that I talk to. Around the time of the Brexit referendum I started watching the news less, which was a very healthy move for me. And I don’t check my investments every single day.
At first, I was taken aback, wondering if my investment strategy was sound. Yes, I lost a shed load of money – to date 5% of my pension and 10% of my ISA (index funds), though my most valuable asset is currently still our home. More on this later.
As a disciple of JL Collins’ Simple Path to Wealth I know that stock markets always go up and down, but on the long term always go up. Just breath in, breath out, and hold your position, I told myself.
It kind of worked. Kind of.
I had just been paid and had money on my hands.
Getting sucked into Google
For some time I had been wanting to buy Google stock but it always seemed too high. Now it was going straight down. Perfect time to buy, right??
In January it reached $1,524, on Wednesday it was heading towards $1,400. I wanted to buy at $1,400, but it was stalling just above that, then it went up a bit as I watched, and in the end I bought at $1,413.
My heart started beating slower, I had my Google stock and was happy. I got it over $100 cheaper. One day later it went down as much as to $1,314. That’s shy of $100 difference!
Holy cow I got a bad deal! I’m glad I tested this new tactic with one share and one share only, because I feel I panicked and bought… whenever.
My pension
If you’re surprised my pension pot – which is larger than my ISA – only went down 5%, it’s because only last week I instructed its transfer to the brand new Vanguard pension. What timing!
They tell me a pension transfer could take up to 10 weeks, and as the product is so new to the UK market they cannot be any more specific as they don’t have history of which providers are quicker than others to transfer their customer pensions over to Vanguard.
Currently my pension is in transfer limbo, but so far it may be that this makes my losses milder. Only time will tell.
I am certainly not the only one in the UK who moved part or all of their pension to Vanguard, hence selling it in one place and buying it another one. In the course of time we will know how much money was moved just because of this, and how much of a difference it may / will have made to the crash altogether.
Not pointing the finger at Vanguard, I see it more as an unlucky coincidence, because no one can predict stock movements, not even Vanguard.
My ISA and my daughter’s Junior ISA
This is where I transfer in money automatically once a month and Vanguard buys for us as soon as the money is cleared. I don’t need to do anything other than watch it go up… or down.
Frankly when mine and my daughters’ index funds holdings went into free dive, I felt weirdly relieved I am not on track to retire… tomorrow.
Mr RIP knows this situation only too well, and describes his feelings of losing $60,000 in merely 9 days in (his usual) detail. He resigned what seemed like a second before the crash started, and all his assets cannot distract from the fact that he has a wife and a kid and lives in expensive Switzerland. I’m not worried about him, smart as he is, but it puts things into perspective.
At the same time a crash like this reminds us to keep focusing on the bigger picture. I feel I have taken a step back from obsessing about finding more saving opportunities, better investments (oh my Google stock) and uncovering the negative in my job. I feel weirdly more relaxed. I am more patient with my daughter and my husband. I take the time to clean shoes instead of reading more newsletters – and that really tells it all!
I am lucky that I have time for my investments to recover and flourish.
Our home
I love our beautiful little flat. It’s perfect. Maybe a little small, which is why I regularly look at bigger places to buy, but deep down I don’t think we’ll sell it anytime soon. It’s perfect for us.
Besides our flat I have never felt too attracted to the property market as an investment – index funds offer the easy solution where you can put in as much as you have, take a break if you change jobs or need cash, and remove any struggle with deposits, real estate agents, mortgages and re-mortgages, tenants, broken toilets and leaking ceilings.
Financial Samurai though has a point about property investments – no matter what the stock market does, a tenant still has to pay you rent. Sure they may lose their jobs and have no money left, but this crash is sooo different than the previous ones.
Which brings me to my next point
Coronavirus is not man-made
2008 was about subprime mortgages, which was man-made. The 2000 dot-com bubble was man-made. The 2020 coronavirus crash is about a virus and it’s global effects mainly on logistics and people’s movements – it’s not man-made. Which makes it very different.
Let’s remind ourselves how corona is impacting us.
- Diageo, owner of hundreds of drink and food brands, predicted a £200m drop in profits because people in China and other Asian countries are not going out and getting drunk any more.
- The fashion industry may not have clothes to fill their stores in Europe and the US as they are all produced in China, where workers are not going to work in their factories at the moment. The only exception being Inditex (Zara, Massimo Dutti) who are based in Spain where they also produce their clothes. This was a strategic move decades ago so that they could respond quicker to market and season changes, leaving out the longer shipping times from China.
- Technology companies are facing delays in receiving parts (e.g. microchips) which they import from China.
- Museums like the Louvre are closed and conferences are being cancelled (most notably the international auto show in Geneva), travellers cannot or don’t want to fly abroad, and future trips are not being booked. Not a good time to work for an airline or hotel, to be the owner of a small BnB or being an Uber driver.
- Face masks are sold out in many countries, but question remains if they are effective in the first place.
- Netflix, Amazon, online study courses and tools to work from home are only some of the winners.
How will you remember it in 10 years’ time?
When I face a bad situation, this is the question I ask myself. Most of the times the answer is ‘I probably won’t even remember it’.
In this case I will remember it, the question is what impact this will have on my personal assets and how it will have changed the world.
The future of work
I have written about this in the past. It seems remote working will become more widespread and, in some cases, even the default.
I rejoice because this is most likely what I will do after my current job. I have chosen to ditch the commute and work locally, but office-bound jobs in my area do not offer enough choice nor salary. I want distributed work, I want more flexibility and choice of what to do.
At the same time I acknowledge that I am lucky I can do this. Let’s take a moment to remember the job types that cannot be carried out remotely: police, doctors and nurses, architects, road engineers, train and taxi drivers, food shop and Amazon delivery people, factory workers to produce face masks, medicines, technology products, fashion, etc.
Finally…
The biggest lesson for me has been that financially shit can happen to anyone, and the best things one can do are:
- Know that it can happen, then you’ll have had time to prepare yourself mentally and decide on your asset allocation.
- If you are about to retire, be open to changes to your short term path.
- Have some mini-retirements before the ultimate retirement. This way, if you have to work longer, you will still have enjoyed the ride.
0 Comments