The World is On Sale » Bear market

There are two main drivers of an financial decisions as they relate to investing: fear and greed. Fear of the unknown can drive us humans be act quite illogically, and utilize emotion for decision making. Greed can do the same, causing us to act hastily before we have had a chance to think over our course of action. This current bear market is no exception.

As the coronavirus spreads, fear over the disease’s impact on world economies is high. This has caused a massive selloff of equities, which as of this writing has seen a >20% drop of the S&P500, which means we have officially entered a bear market (Investopedia).

*Lions, tigers, and Bears, Oh my!*
Photo by Diandra, June 2018, Canada

Find your way around:

What if you are currently living on your investments during this bear market?

Wealth preservation phase: Don’t panic, re-balance your stock to bonds ratio by selling bonds as they increase in value and holding onto stocks when possible to limit your realized losses.

What if you have many years remaining before you intend to start living off your investments?

Wealth accumulation phase: Invest extra cash (outside of your emergency fund) in VTSAX, Vanguard Total Stock Market Index. This one fund will allow you exposure to all companies currently being traded on the NYSE. Also, if you are a bit fearful of watching your net-worth(NW) drop, you can also invest in VBTLX, Vanguard Total Bond Market Index.

These two funds will give you the ability to enjoy the inevitable rise of the markets once the coronavirus fears have subsided.

BUT IT’S THE END OF THE WORLD!?!?

To invest in the market, you must be an optimist, as well as have an iron will and strong psychology. We believe the U.S. will both survive this pandemic, and come out stronger than ever on the other end.

If you are unable to watch your NW get cut in half more than once, than this investing strategy is not for you. If you believe this is the end, then do not invest, and go live in your bunker and eat canned goods.

As JL Collins, our wise financial elder, reminds us: The market relentlessly goes up. How can this be you ask? Over the long term, the market always goes up. An example can be found here: S&P500 Historical Chart

This strategy is not for the faint of heart or those looking for a “quick fix” solution. This strategy is for the long term investor that understands the market of the companies, which underlie the market of a stock price.

So if you want to invest for the long term, utilize dollar cost averaging (DCA), to put money into the market at specified intervals over a period time (ex. twice a month for 12 months). This will help you begin your investing journey.