1) Monday Morning Financial Update: To say there's a lot going on might be the biggest understatement of all time. You need to be sure to separate the problems in your mind, so they don't cluster into an unsolvable mess. There are currently three major problems.
2) The three problems are the virus, the stock market, & the economy. I won't spend any time today on the virus, although I urge you to do whatever Dr. Anthony Fauci says. I'm doing my part by requiring my staff work from home, & working from home myself. Listen to scientists.
3) Problem #2 is the stock market. It will decline significantly today. You'd think knowing this information ahead of time should lead to action (buy/sell), but it's in your best interest to stay put. For most investors, likely including you, the market is a long-term play.
4) It's IMPOSSIBLE to both know where the stock market bottom is as it's happening, and when to "get back in." This is why you should stay in. The market has survived every single modern disaster, both natural and man made. Diversification remains the key.
5) Some businesses will go bankrupt, including some very well-known companies which government bailouts won't be able to save. This is why diversified investments like mutual funds and exchange-traded funds (ETFs) are the best choice for most people.
6) Mutual funds and ETFs, which happen to be what's in most people's 401k, consists of the stocks and bonds of hundreds of companies each. Which means if you have 4 ETFs in your portfolio, you could be diversified between 1200-2000 different companies. This is a GREAT THING.
7) It's also why you should take solace in knowing that as the market continues to fall (and it will), your 401k deposits are buying these diversified instruments at cheaper and cheaper prices. This is a GREAT THING too.
8) Believe it or not, it forces you to follow the cardinal rule of investing: Buy low and sell high. In a perfect world you took some gains in January. But if you didn't, now is not the time to go to cash.
9) If you don't need the money you have in the market in the next few years, LEAVE IT ALONE. The only thing I'm personally doing is making sure my 401k deposits keep happening on a regular basis.
10) The third problem, which is a much bigger problem than the stock market, is the economy. How do I know it's the bigger problem? Because the stock market going down is the signal to let us know the economy is in trouble. This isn't tough to figure-out, and you likely know this
11) The US economy is going to Rip VanWinkle for about three months. You can't remove a fiscal quarter and expect anything other than a large market decline. We're in a recession, which is defined by negative economic growth typically across two consecutive quarters.
12) Q1 which ends on Mar 31st is the first negative quarter, and the Q2 will be the second. This is why the Fed just lowered the Fed rate to ZERO and injected $700 billion into the economy in the form of quantitative easing. The Fed is trying to limit the recession to 2 quarters.
13) The $700 billion dollars purchased treasuries to stabilize treasury prices and to provide liquidity to our banking system. The reason for this is to provide business capital so they can stay in business. Don't get distracted by people complaining about this.
14) The Fed intervention is designed to save your job. Seriously. You're safer when your boss can borrow to pay you. The government is likely to push the tax filing deadline past 4/15, but if you're getting a refund you should go ahead and file now. You're gonna need that money.
15) Additionally, I'd look for the payroll tax holiday to get passed and start within the next three weeks. This will create some much needed relief for both you and your employer. I still believe your biggest non-medical risk at this time is unemployment.
16) That's not to suggest that it's going to happen, but the chances of it happening are much higher than they were even 1 week ago. Which brings us to your role in all of this. You can't just sit by and watch all this happen, although I do prefer you do sit inside.
17) You need to take a critical look at your personal finances, make cuts, and press reset on some bad habits you've mistakenly adopted over time. Starting today at 2p EST, I'm doing a daily live stream for 30 days (Saturdays and Sundays too) to help you do just that.
18) You can participate for FREE. The live stream will be on the Hey Money Facebook page. Just go there and LIKE the page to gain access to the stream. I'm going to post on YouTube too, after the initial broadcast. facebook.com/Hey-Money-1114…
19) During the 30 day program, we're going to spend approximately 15 hours digging into your finances like never before. Think of it like a MasterClass (now is not the time to sue me, MasterClass).
20) I'll have some additional resources available for hospitality industry folks later this morning. Their financial lives are at a very high risk level right now. I'm yours over the coming weeks. See you at 2p EST on the Hey Money FB page. facebook.com/Hey-Money-1114…
