This downturn is unlike many in the past, though we may wish otherwise.
The reality is that things may get much worse before they get better.
The extent of the economic damage being wrought on the global economy is only becoming painfully known as the weeks go by.
But don’t despair, dear reader.
There is a method to deal with big disasters such as these.
I liken it to preparing for a severe hurricane.
We need to batten down the hatches, stay focused and ensure we can survive the big storm.
Here are some suggestions on how to get through these tough times.
Be mentally prepared
As the virus rampages around the world, be mentally prepared for even more “circuit breakers” and disruptions to daily life.
Economic activity will grind to a near halt as governments around the world shut borders, malls, factories and businesses to contain the virus’ spread.
Investors should be mentally prepared for a moribund stock market and continued depressed valuations.
If you are staring at paper losses, don’t fret.
Markets and businesses will eventually recover.
It may take time and lots of effort, but I am confident that we will eventually prevail over the pathogen.
Do not over-commit
During these tough times, remember not to over-commit to large household expenses.
Such commitments should be deferred until the overall economic picture improves.
On the investment front, remember not to sink all your cash into the stock market.
No one knows how long this crisis may last, and there could be more downside to share prices and valuations.
Businesses may continue to suffer and bleed for an extended period, even with Government support.
Pace your share purchases
If you are holding on to spare cash, remember to space out your share purchases.
Rushing to deploy your capital is unwise as the bear market may drag on for much longer than we expect.
By pacing your purchases, you can also ensure that you have dry powder left to average down should valuations become more attractive.
If you own dividend-paying blue chips such as Singapore Exchange Limited (SGX: S68) or OCBC Bank (SGX: O39), the cash received can help to replenish your kitty.
The process of slowly deploying your capital into strong companies and reinvesting your dividends ensure that you will build a robust portfolio for your retirement.
Get Smart: Ensure you have enough cash
Finally, it’s important to always ensure you have enough cash for emergency needs.
Experts recommend that we set aside an amount equivalent to twelve months of expenses as an emergency fund.
This money will serve you well in case of any emergencies or exigencies.
Meanwhile, the Singapore Government has also announced a Resilience Budget and, more recently, a Solidarity Budget.
These budgets are designed to provide a financial boost for struggling businesses.
They also contain goodies in the form of cash and rebates for individuals.
This cash infusion will further help to provide a stronger cushion as many may have either lost their jobs or witnessed salary cuts.
For those fortunate enough to remain unaffected, the extra cash could be channelled into suitable investments to grow your pot of money even further.
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Disclaimer: Royston Yang owns shares in Singapore Exchange Limited.
