The US Market has continued to crash, with the Dow Jones Industrial Average (INDEXDJX: .DJI), or DJIA, falling 17.3% in the last week alone to a new 3-year low of 19,173.98.
The DJIA is now 35.2% below its all-time high, with the broader S&P 500 (INDEXSP: .INX) index down 32.1% and the NASDAQ (INDEXNASDAQ: NDX) down 30.1%.
With our own Straits Times Index (SGX: ^STI) down 29.4% year-to-date, stocks are heading deeper into bear market territory.
With more and more countries shutting their borders in order to contain the Covid-19 pandemic, airlines and tourism will take the brunt of the economic damage.
As supply chains continue to get disrupted, many are looking for signs of the outbreak stabilising.
There is some good news on this front — the previous epicentre of the virus outbreak, Wuhan in China, has reported no new local cases for the past three days.
Other countries such as Italy are not so lucky, with the death toll jumping by 627 in a day in Italy and hitting 4,032.
It is going to take a lot more determination and coordination by various countries in order to get the situation under control, but we are confident it will eventually happen.
In the meantime, our advice to readers remains the same: pace your purchases and ensure you have adequate cash inflow to sustain you through this difficult period.
Keep yourself and loved one safe, and we will all get through these tough times unscathed.
We share some wise advice from the late Louis Rukeyzer after the 1987 market crash.
He said this…
“OKAY, LET’S START WITH WHAT’S REALLY IMPORTANT TONIGHT.
IT’S JUST YOUR MONEY, NOT YOUR LIFE. EVERYONE WHO LOVED YOU A WEEK AGO STILL LOVES YOU TONIGHT.
… AND THAT’S A HECK OF A LOT MORE IMPORTANT THAN THE NUMBERS ON A BROKERAGE STATEMENT
THE ROBINS WILL SING, THE CROCUSES WILL BLOOM, BABIES WILL GURGLE, AND PUPPIES WILL CURL UP ON YOUR LAP AND DRIFTLY HAPPILY TO SLEEP, EVEN WHEN THE STOCK MARKET GOES TEMPORARILY INSANE.”
His words struck the right chord with investors suffering from the massive decline.
I am sharing Rukeyzer’s words today with the hope that the words bring the same solace for you today, suffering investor.
Keep your chin up, look ahead
At the Smart Divided Portfolio, we have emphasised some key basic rules right from the start.
1. Have an emergency fund ready
Simply said, an emergency fund is a sum of money that you set aside for rainy days. The key here is to park these funds in a place you can access when you need it most.
The situation today is a good reminder of why that fund is important.
2. Don’t use any cash you need for the next five years to invest.
Any cash that you need to use in the next five years should NOT be in stocks. Period. Because we are planning to hold our stocks for five years or more, we shouldn’t put any short-term cash needs at risk.
3. Do not pour all your money into the market at one go
While it may seem like a lot has happened, it’s important to remember that it’s only been three months since the coronavirus spread around the world.
Pace yourself when it comes to investing.
Allow time for companies to report their earnings next quarter or semi-annual earnings, and assess the business again.
Ultimately, our goal as Smart Investors should stay the same, regardless of what the market throws at us, focusing less on stocks that have fallen the most, and instead aiming always for the best companies that we can find.
We’ll get through this, readers.
FREE special report: The Bear Market Survival Guide. If you’d like to learn how to survive this bear market, CLICK HERE to download our special free report.
Disclosure: Chin Hui Leong does not own any of the shares mentioned