It’s been almost two years since I’ve written a post, but I felt like now would be a timely time to talk about investing lessons learned from COVID-19. Let’s take a pause and reflect on where the market is today and what we can glean from these trying socioeconomic times. The stock market has surprisingly rebounded, but it hasn’t yet even reached the top from where it had plummeted. Now let me preface this emphatically that if you’ve lost a job or are struggling with money given the unprecedented unemployment numbers, then of course focus and prioritize on keeping cash on hand to pay for living expenses. With that said, let’s use these surreal times to learn some timeless investing lessons from this whole experience.

  • First lesson: Try not to panic. I’ll admit I was super terrified of the stock market back in March. I’ve been an active DIY investor since 2010 and I’d never seen a nose dive quite like what we had witnessed. There has been turbulence, for sure, over the past decade but none set against what felt like an apocalyptic situation. I would say for the first time I pondered what would happen should the stock market hit rock bottom? That would be something: a remote possibility but it felt palpable and so very real. But despite my own fear, I stayed calmed. I enabled the rational side of my brain to remind myself that the stock market has been operating for more than a century and has been buffeted throughout history. I also reminded myself that I have an abundance of time on my hands to recover all of my losses, which were significant. So, lesson learned: it was undeniably scary, but as the British say, “stay calm and carry on.”
  • Second lesson: Keep investing consistently. Buy low, and sell high is one of the axioms of investment philosophy. So for you investors who are in your wealth creation stage (i.e. those with more than 10 years on their side to keep investing) versus those in wealth management (i.e. those in retirement) stage, then investing regularly is key (and automating it is even better). Remember that when the stock market goes down, it’s only the value of your shares that depreciate. But your quantity of stock remains exactly the same whether the stock market is at 29K like in February or at 18K like in March. So had you kept investing during the past 6 months, you would have bought stock at an incredibly discounted rate. Don’t stop your 401(k) / IRA contributions if you can.
  • Third lesson: You may come out richer. Had you applied lessons one and two, you would have come out richer. And you’ll be even wealthier by the time the stock market returns to its pre-COVID 19 levels. By buying more and more quantities of stock at discounted rates, you’re able to buy even more shares. And when the value of those shares go up as they have been, your total portfolio will be even higher. You may say, how is the stock market performing so well when the economy is in a recession and so many businesses are closed? Let’s remember that the stock market is made up of publicly traded corporations, many of which were kept open during this, and reflects only the expectations on their earnings – not on the earnings of restaurants, bars, etc. businesses that had to shut down. So if investors’ beliefs and the companies’ earnings are trending optimistically about a vaccine / therapeutics, then the market itself will go up despite the dismal economic disruptions surrounding it like today. So try to see the sliver of opportunity in the broader crisis.

There’s another perspective that I gained through all of this. It dawned on me that with essentially the world shut down then what was the purpose of investing / saving money? We generally save money today so that we have even more money tomorrow for things that we enjoy, such as traveling, etc. Right? But if tomorrow is “on hold” for all intents and purposes, and if you share my mentality that money is a means and not an end, then what is the value of a dollar saved. All I could spend money on was groceries – that’s it. One does not need an abundance of wealth for that. I’ve spoken about this in my book about the subjective meaning of wealth: it’s on you to determine what money means to you. Now, this was just a philosophical rambling, as in the long term we’ll eventually return to a more normal state as this too shall pass. So do keep investing. 

Now, as an afterword, of course the stock market could again experience even more turbulence as the cases resurge and state and local shutdowns happen again, but nonetheless these lessons learned will be applicable to whatever turbulence may happen going forward. So buckle up and remember that without risk, comes no reward.

Follow me on Twitter @MatthewKMiller.

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