Investing During The Corona-Crash

Investing during the Corona-Crash is full of opportunity and danger. 

A few broad strokes that describe my assumptions coming into the crash and what I've been doing so far:
  • I had very limited exposure to stocks before the crash. I'm not claiming any genius -- I've been bearish for years based on valuation, missed a ton of gains. 
  • But, years of gains have been wiped out this month, as happens when valuations are so high and there is a negative catalyst. This catalyst is awful and nasty.
  • My biggest position was treasuries. After that, a mix of business, commercial RE, and farmland.  
  • I had created a plan for investing if and when the stock market came down. I spelled this out in my first post. I've been trying to follow that plan.
Here's how I'm currently positioned:


How I'm Thinking About Investing

So, over time, I expect the Treasury allocation to go down and the Stocks allocation to go up. My rules for this allocation are as follows:

Market drop: -20%  Invest: 15% of available cash / treasuries into stocks
Market drop: -30%  Invest: 30%
Market drop: -40%  Invest: 50%
Market drop: -50%  Invest: 75%
Market drop: -60%  Invest: 90-100% 

Is this market timing?  Yes. As we hit these levels on big down drafts, I'll put money to work. When we have bear market rallies -- like yesterday, the largest one day gain in 87 years -- I will look to take profits. So, I will have a mix of shorter and longer term time horizons.

What I'm Investing In ...

The majority of my investible money is in retirement accounts, and my choices are somewhat limited. So, most of my equity investing will go into the S&P 500 index (large cap), the Wilshire 4500 (mid and small cap), and International (large cap). For this reason, I will spend a lot of time looking at the indices.

I'm also trying to gear up my stock picking portfolio to take advantage of individual company stocks. This is much more difficult. I'll spend more time on this later, but for now here are my initial thoughts.

Avoid: Companies that are in danger of going bankrupt based on Corona-shock, i.e. airlines, restaurants, highly leveraged companies. I don't want to try to pick survivors.
Buy: Companies that are part of longer term, secular growth trends and will benefit from the Corona reaction, i.e. video games, remote work, gold miners (due to fiscal response), biotech, cloud compute.
Buy: Companies that are part of longer term, secular growth trends, and are currently getting punished by the crash, i.e. gene editing, weed legalization, many of the same areas listed above.
Buy: Strong, high-quality companies that represent deep value and/or good dividends as they go down with the market, i.e. Exxon Mobil, JP Morgan. 

Quarantine Thoughts

We're now effectively shut in our apartment for the time being. Someone in our building had the virus. We're still thinking of where we might go to have more access to the outdoors if this situation is prolonged. Weeks? Months? We just don't know.

That said, this is probably a time to keep it simple. Our #1 goal is to stay healthy, and the best way to achieve that goal is to stay home. If this is a crisis -- and it certainly IS an unprecedented crisis in our lifetimes -- then going into crisis mode is warranted. Not panic mode, crisis mode. Stay healthy, stay safe, put our mental energy toward helping each other through this.

What I'm Reading ...

The New York Times coronavirus coverage is freely accessible and a good source of facts.

Stoic / Mindful Thought ...

From The Daily Stoic reading for today, Epictetus: "... freedom isn't secured by filling up on your heart's desire but by removing your desire." Holiday then comments: "There are two ways to be wealthy -- to get everything you want or to want everything you have."  

Appreciating today that we have what we need to get through the day. 

What I'm Listening To ...

A brief moment of quiet!

What I'm Watching ...

Curb Your Enthusiasm. It was really fun to laugh out loud at a TV show last night.

Final Thought ...

Today will be a good day if I react to these circumstances with patience and kindness. It doesn't really matter how much math the kids learn or what kind of mess is made or my own free time. These circumstances require inner strength.

Comments

Post a Comment

Reader thoughts welcome.

Popular posts from this blog

Redrafting a Winning Team

Image
When I started really investing in stocks again during the pandemic, I did a good job of legging into stocks while the market was going down. I had a plan ahead of time and the cash and time to execute that plan.  Well here we are again with a difficult market and I'm not as prepared as I was. I have less time because I'm not riding out the pandemic from a lake house. And, like many investors, I let my tech shares go too fast and too far. I lost sight of an earlier post, Drafting a Winning Team, and let my portfolio become less diversified. The beautiful thing about current brokerages is that one can quickly adjust a portfolio without incurring commission costs.  So here's a current look at my portfolio by sectors. WHAT I LIKE: Commodities and Shipping are well placed right now. Within this sector I'm focused on Brazilian companies (EWZ) that have a lot of exposure to oil and gas and mining. There are some financials thrown in the EWZ as well, which would do well with r...
Read more

604: Long Term Investing Through Short Term Volatility

Long and Short Term Investing I've always enjoyed investing but one downside of watching markets closely is that it's easy to get spooked (Halloween reference!). And yes I've been spooked before. I started investing right before the Dot Com Crash, and I was really active during the GFC. I made some good moves but in both cases I ended up making long term moves based on short term spookiness. Yes, 2 years can be called short term. To be fair, if you invested during the tech bubble and the credit crisis, you will remember that it was very, very spooky.  The other factors were: I didn't have a lot of extra money, so I felt like I was losing money that I needed. I was paying close attention to a few writers who were confident that markets would stay down, or retest lows, or [fill in the blank with smart sounding reason to worry]. I didn't distinguish between Long and Short Term positions. I got outright bearish and tried to make money going short, and failed, which only...
Read more

Momentary Tension

There's a tension in my mind between living in the moment and seeing the bigger picture. It's in vogue to be in the moment -- be mindful, notice, observe. It's the only slice of time one experiences. Yesterday's gone and tomorrow never comes.  I was listening to a podcast and the conversation was about why people hold onto beliefs that they know are weak or even untrue. One reason is the idea of a personal identity being defined by or connected to a certain belief, whether it be religious or tribal or whatever, and the fear that losing a belief will call that identity into question. And, there is some sort of weight given to consistency and continuity of self. If I don't believe this certain thing that I believed yesterday, who am I?  There is, in a sense, a sunk cost of belief. It's as if we've invested in our point of view and to change our minds would somehow waste ... something. Which is a fallacy: The Sunk Cost Fallacy describes  our tendency to follow ...
Read more