Weekend Reading – Financial lessons learned from COVID-19 – so far…
Unprecedented times…I hope you’re doing OK out there through it all…
Welcome to my latest Weekend Reading edition where I share some of my favourite articles from the week that was across the personal finance and investing blogosphere.
Financial Lessons Learned from COVID-19
You know, you learn a few things after two decades of investing. I started getting into investing (seriously) when the tech bubble burst 20 years ago. 10 years later, the global financial crisis hit and wiped out many investors in its wake. I started this financial blog around the same time. It was designed around the premise to be my own financial advisor, to chronicle lessons learned, my thoughts about investing, share what I’m doing better and become financially wealthier for it.
Now, some 10 years after that started, COVID-19 has essentially flattened economies.
But you know what?
I’ve learned things will eventually get better. Stock markets will rise again, eventually. This too shall pass!
While stock market declines in general are indeed, painful, I also see opportunity. I see a HUGE opportunity to learn from our current events. I see an opportunity to embrace the long-term tenets tied to financial wealth-building. I see opportunities to curb your financial behaviour for the better going-forward – to help deal with future crises on any similar scale. Who knows, this could happen again…
Headlining my Weekend Reading edition I thought I would offer a few quick personal takes on what financial lessons I’ve learned (so far) from this COVID-19 pandemic. I’m sure I’ll have more to write about on this subject in the coming weeks.
1. It still sucks to see your portfolio value crumble
You don’t have to tell me it’s a great time to “buy low and sell high”. Or, in my case, “buy low and keeping buying over time”. I know that. But it still sucks to see your portfolio value down tens of thousands of dollars – sometimes in ONE day.
2. Dividends are never guaranteed – ever
A recent announcement about Inter Pipeline cutting their dividend by 72% (not a typo) is a great reminder of this fact: dividends, while very good, are never guaranteed long-term. I say this even though my thinking about dividend investing remains unchanged.
On the positive side, many of the stocks I own continue to pay dividends. In fact with lower stock prices now available, dividends reinvested are buying even more shares for me commission-free than they did before. You can read up on how dividend reinvestment plans can help you build wealth here.
3. Even if you have an emergency fund – have a little more
I’ve highlighted the reasons why my wife and I have wanted an emergency fund for about 10 years now, and we realized our goal by maintaining this much in our account about 4 years ago.
I cannot imagine not having this fund maintained at this level, just in case…
If anything, I want to keep more cash on hand as I get older, and I’m trying to work on that over time.
An emergency fund is important because you never know when a true emergency strikes. Insert COVID-19 here. I feel for folks with a large Home Equity Line of Credit (HELOC) who are now out of work and have used their HELOC as an automatic teller in recent years. While HELOCs are OK for short-term debt (such as a few months), owning long-term debt as part of a HELOC is simply not wise. Sadly, many people are going to learn a very, very tough lesson about this during this crisis…
Like I mentioned above, I’m sure I’ll have more reflections in the coming weeks.
Thoughts on these as a starting point? Any financial lessons you’d like to share with me? Comment away!
Earlier this week, even with markets down some 20% from previous highs, I stayed the course.
In fact, that means buying in the coming months while saving more cash on hand across various accounts. As guidance and support through this COVID-19 crisis, here are some thoughts for inspiration (because nobody is perfect at this financial stuff including yours truly):
Stay safe, stay well, and see you here next week,
Other cool reads
Seems like my pick is holding up rather well in Roadmap2Retire’s annual stock picking contest. So far, so good!
Boomer & Echo highlighted how he’s managing his money during this financial crisis.
Ben Carlson, who manages portfolios for institutions and individuals at Ritholtz Wealth Management LLC, also shared how he’s managing his money during at this time. Smart reminders about his approach to long-term stock investing:
“I’ll be a net saver for the next 20-25 years. I’m not going to touch the majority of this money for decades. Stocks are on sale. This is a good thing for my savings. It’s painful for current holdings but wonderful for future balances.
If stocks go down more I’ll be buying more.”
Cut The Crap Investing offered some advice on when to embrace a stock market correction.
Dale Roberts also offered his definitive list of Canadian dividend moat stocks to buy and hold. I hold all seven myself. You can see highlights of what I own in my portfolio for growing dividend income with time here.
Regardless of what the stock market is doing, A Purple Life is still planning to try and retire, in her 30s, in the coming 5 months.
Reader question of the week (adapted for the site):
Hi Mark !
Quick question for you this week. Being a relatively young investor I was thinking about selling my non-registered portfolio which consists of VEQT. I bought it at $27. It was close to $21 recently!
Should I stick with this? I was thinking that if I sell some VEQT now I can buy it back when the market goes up (at least historically it does after a crisis). Let me know if I have good reasoning! I’m just getting started with investing and this is my first big crisis to buy!
Thanks very much and have a good weekend Mark.
Well, great idea to buy and hold VEQT. It’s a great low-cost fund I’ve written about a few times. In fact, buying more VEQT over time is GREAT way to get started with investing and build wealth.
Owning VEQT for the coming years if not decades is a GREAT idea. Not so great idea, (my opinion since you asked!) is to try and time the market. I don’t know of any expert who can do this successfully. So, don’t even try!
This is how I’m working through this COVID-19 stock market crisis and how you can become wealthier too.
Happy investing and thanks for your readership.
In closing, here is some inspiration from Sam Roberts, how we can hopefully stick together/since we’re all in this together and get through this viral pandemic. Great song, great band. I hope to see them again when they tour to Ottawa next time. Enjoy the solid music and video.