With the emergence of the coronavirus, we find ourselves in a global pandemic of proportions that, in our lifetime, we have only watched in movies.
Long forgotten by most, it has been 102 years since the Spanish flu of 1918. It was the deadliest flu in modern history, infecting more than a third of the global population at the time.
While we hope the coronavirus impact will never reach the extremes of the Spanish flu, the disruption is changing our daily routines. How do we manage through this distraction?
Our daily focus should not change because this disruption is changing our normal routines. Families find themselves at home together with children learning in a virtual classroom and the parents working remotely. This change is unsettling, filling us with anxiety, fear, and a variety of other emotions.
To minimize the distractions in your day, continue to closely follow the same schedule you had in place before this all began. Make lists daily as a reminder of the tasks you need to accomplish to stay on track.
Implement changes that offer stability in your daily life. For example, designate specific workspaces for you and your family members, take breaks and eat lunch together at the same time.
One takeaway from the coronavirus pandemic is to plan and be prepared for the next disruption. This is a reminder of why it is important to keep at least six months of cash reserves in your bank account.
Many people have been laid off for a minimum of two weeks, some employees have lost their jobs and many small businesses may permanently close. The purpose of having a cash reserve on hand is to have the ability to access money in a financial crisis without incurring additional debt or selling out or your investments or retirement account when the market is down.
If you are not prepared financially for this pandemic, your primary focus going forward should be on building an emergency cash reserve.
Keep enough food in your pantry and freezer to last several weeks without needing to make a grocery store run. In addition to groceries, store enough pet food, paper goods, baby items, water and cleaning supplies to last the same period.
We are fortunate that in the U.S., our grocery store shelves are not usually bare. But in some countries, bare shelves are a normal experience. A month ago, we would never have thought that we would be facing the dilemma of empty shelves, followed by waiting in long lines to check out. We have quickly learned that this is our new reality.
Although we live in the U.S. where resources are normally readily available, it is wise in the current circumstances to plan and stay prepared.
The feeling can be gut-wrenching as we watch the stock market indices drop. Most people feel some sort of anxiety when this happens, especially if this continues for an extended period, such as we are currently experiencing. Immediately, we ask ourselves if we are going to run out of money.
While this period is very unsettling, it is important to remember that the market will turn around. Our instinct in a volatile market is to sell out to preserve assets and avoid any additional losses. That approach might yield favorable results if we knew specifically what day to re-enter the market. But we don’t, so hold tight.
The annualized return on the S&P from Jan. 1, 1987 to Dec. 31, 2019, was 11.28 percent. Over this 32-year period, if you were out of the market during the 10 best-performing days, your annual return would have been reduced to 8.85%. If you were out of the market during the 50 best days of this 11,680-day period, your annual return would have reduced to 3.40%.
Staying in the market yields better long-term results.
It is important to maintain a diversified portfolio so that when the stock market drops 30%, your overall financial portfolio does not drop the same amount.
If you are diversified, you are not holding or invested in a single stock, or in a handful of stocks and nothing else. If you are holding stock in the company you work for, a general rule is to hold no more than 10% of that stock in your portfolio.
In most cases, an investor should have a variety of equity (stocks) and fixed income (bonds) in their portfolio. The best allocation or mix of investments depends on your age and risk tolerance level.
The longer your timeline to retirement, the greater the opportunity to hold a higher concentration of equities. Managing risk as you age means gradually decreasing equity positions and increasing the allocation to fixed income.
Remember to make time right now to stay virtually connected with your family, friends and neighbors. People need one another to support each other through periods of disruption.
Call your family members to listen to them talk about how the pandemic has affected them. Check on elderly neighbors to see if they anything from the grocery store. Stay in contact with your friends, through texting, Zoom or phone calls.
Reset your life
Use this period as an opportunity to spend quality time with your family. Since we live in Southern California, most of us have at least an extra hour or so free now that we’ve eliminated our daily commute.
Turn off the electronics for a set period to spend time with your family. Take this time to do some meaningful activities together. Take a walk outside, plan a meal and cook together, plant a garden, build a puzzle or play games. The list can be as long as your imagination.
Sometimes, we get caught up in the frenzy of life and forget about what is truly important. This pandemic is providing us with the opportunity to reset our values while supporting our family, friends, and neighbors on this journey.
Teri Parker CFP® is a vice president for CAPTRUST Financial Advisors. She has practiced in the field of financial planning and investment management since 2000. Reach her via email at Teri.firstname.lastname@example.org.
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