Center for Diseases Control (CDC) said Coronavirus is here for this Season and Year. Well, it appears that it is going to be true. Till now, there are 85 thousands of Coronavirus confirmed cases, including 2,900 deaths. 60 countries have confirmed one or more cases and majority of those are in China, South Korea, Italy and Iran.
Coronavirus is not only infecting humans, but also it is deeply infecting your investment portfolio. Dow Jones has fallen more than 13% from the recent high in just a week. It is more than correction parameter of 10%.
What should investors do now?
It appears everyone wants to sell the uncertain investments like Stocks and move to safe havens investments like Treasury notes and bonds. Do you really have to do this to protect your portfolio from the impact of coronavirus? Let’s look at some possibilities.
What are the possible options and consequences?
- Sell Stocks and move to Corporate or Treasury Bonds
- Sell Stocks and hold Cash
- Stay Invested
The numbers 1 and 2 requires you to sell your holdings, which comes with a heavy price, the obvious capital gain tax. This is a big no-no for a long term investor. It is seemingly not worth it to incure tax now. And the worst is to decide when to get in. You cannot forecast the bottom of the stock market.
So, a long term, sensible investor is left with only choice, i,e. #3. This is not easy to do. It is painful to see your holding loose 13% in a week and you stay there doing nothing about it.
This author himself, apparently, was a victim of his inner adviser, Mr. Do it.
Even though, theoretically speaking, Staying invested during these high tides is the best way to go about, your inner adviser, the Mr. Do it, does not let you sit idle. This is not the first time market has acted this way and this is certainly not the first time the above idea is being pitched. This author himself, apparently, was a victim of his inner adviser, Mr. Do it.
So, put on a Mask; Not the face mask to cover your noses and mouth, but to cover your eyes. Go to the woods, not to stay away from the contagious people, but to stay away from your brokerage account. This is the way to protect your stocks portfolio.
Sooner or later, things will settle down and the stocks will get to the point where they were and beyond. Make sure you are holding cash rich, great businesses and not using margin. You will be fine.
Your author guarantees it!