Well, there’s no way anyone could have predicted the financial situation we find ourselves in now, in the midst of the coronavirus outbreak. The inverted yield curve back in August 2019 didn’t look encouraging, but nobody expected a global pandemic and subsequent mass shutdown this spring. In the midst of the turmoil, a lot of people are experiencing financial distress, both for immediate needs and in their retirement accounts. I wanted to address the market conditions and give a personal update, since some folks have kindly asked how I’m doing.
Stay the course, and Don’t Panic.
Though this global shutdown is unprecedented, market conditions have been in this kind of state before, and have always rebounded eventually. In the 2000 dot-com crash, it took 4 years for the economy to recover. The mortgage crash of 2008 likewise took 4 years to come back. Both of these events were the longest bear markets since the Great Depression in 1929.
I want to acknowledge how scary it can be to see 30% or more of your 401k balance vanish seemingly overnight. It can be tempting to want to sell and get your money out of the market, particularity as unemployment skyrockets and nobody really knows what’s going to happen tomorrow.
Pretty much every financial company out there – Fidelity, Vanguard, Schwab, and so on – will advise you to stay the course and tough it out. Selling when the market is low is usually a formula to lose money. In fact, if you can afford to, continuing to put a constant amount into your retirement account now is the best way to get bargains and smooth out market volatility (known as dollar cost averaging). As I’ve suggested before, broadly diversified market-tracking ETFs are the best foot forward for many. Another tip: once your account is set up, do yourself a favor and don’t look at it more than once a month or so. It’ll just generate anxiety.
Personal Dividend Performance
For January to March 2020, I’m averaging $970/month in dividend income. That’s lower than the $1,191 that I predicted, but the reason for that is many funds have large dividend payouts at the very end of December, and January tends to be a dry month. In fact I only made $146.67 in December, so it skews the result. In actuality, I’m on target for the year right now.
The future past March remains unknown. Dividends are not guaranteed, as I’ve mentioned many times, and in this financial environment some are already being suspended, like CCL (Carnival) and many REIT ETFs, due to the mortgage cash crunch. I don’t anticipate companies like AT&T or Apple slashing their dividends, so right now I do expect to see a decline but not a considerable one. Time will tell. For the moment, I’m doing fine – I’m healthy, my family is healthy, and we have food and a comfortable place to shelter. These are always blessings, but we tend to forget until reminded.
Many people are in survival mode at this time as their jobs get cut, so if you have the means, please consider giving back to the charities supporting so much of the good work being done right now.
If you’re looking for suggestions, here are four charities that I personally donated to. Each is a top rated charity organization by Charity Navigator and Charitywatch.org (i.e., they’re very effective and have low operating overhead). Even small donations can make a big difference.
World Vision: Delivering both PPE and family meal kits
American Red Cross: Blood donations and relief
Samaritan’s Purse: Emergency medical (responsible for the 68 bed, 14 tent field hospital in Central Park)
Meals on Wheels: Delivering meals to shut-ins and elderly, more important now than ever