All posts by Art Dinkin

An open letter about COVID-19 and your money

I am not a doctor. I have no advanced degrees in epidemiology or public health. That is not my area of expertise. Like you, I am trying to process the constantly changing information as it becomes available and make sound decisions for myself and my family.

I am a financial planner; my expertise is money. I earned my Certified Financial PlannerTM designation nearly twenty years ago after starting my financial career in 1989. In my professional career I have worked through –

  • The recession in the early 1990’s caused by the fallout from the Savings & Loan crisis and the decrease in government spending after the Cold War;
  • The “new normal” of the dot-com era which proceeded the dot-bomb and recession in 2001;
  • The Great Recession of 2008; and now
  • The current 2020 bear market whose economic impact still unknown.

During my career we have seen SARS, H1N1, Ebola, and Zika outbreaks. Unfortunately, we must now add COVID-19 to the list.

We have been told to practice social distancing, and it seems as if everything around us is shutting down. Over the last few days, we have seen toilet paper go from a common household item to a rare and sought-after commodity. The same panic which has sent TP flying off the shelves at retailers is also causing mass selling of financial products in the markets; when there are more sellers than buyers prices plummet.

From more than 3 decades of experience I can freely share the most important financial advice you need to hear right now: Relax. Don’t Panic. Over time, the financial markets are extremely resilient. Be patient. You don’t need 300 rolls of toilet paper and you don’t need to sell into a panic.

If you go “all cash” there will not be a clear indicator when we have reached bottom and you should get back in. The bottom only becomes clear when you view it from the rear-view mirror. There are so many unknowns that everything is very unpredictable. The Dow rallied nearly 2000 points in an hour as the markets came to close last Friday. Was there a clear indicator that was about to happen? Of course not.

On Friday morning we posted on Facebook that in the past 20 years, 6 of the 10 best days happened within two weeks of the 10 worst days. Investors who missed the 10 best days of the past 20 years missed out on more than 3.5% average annual return per year. We had no idea Friday would turn out to be the single largest point gain in history, just as we have no idea what tomorrow will bring.

This time it is no different. We need to focus, as a society, on what we can do to contain this virus. Wash your hands often, stay home and distance yourself from others, be kind and patient with those you do interact with; we are all in the same boat of uncertainty. Focus on doing what you can do to help and try not to worry about the things you have no control over.  Eventually, life will return to normal. The sun will rise tomorrow, and eventually the stock markets will recover. This too shall pass.

If you have money on the sidelines, consider investing half of it now and then waiting a month. If, during that month, the markets go up you can take your money back out and enjoy the profits. If the market continues to decline, you can invest half of your remaining reserve and repeat the process again a month later.

If you have questions or just want to talk to someone, we are here. You can email me or give us a call at 515-255-3354. We will do our best to make sure you ACT in accordance with your long-term financial plan, instead of REACT in a way which may cause more harm than good.