As the stock market dropped down into bear market territory, I created this video with some of my thoughts on March 12, 2020. You can choose to watch the video or read the transcript below.
Video Transcript
Hi friends, I’m Rebecca, welcome to Squintillions! Today I am talking about what is going on in the market and how I am reacting.
First, the news of the day is that the market is dropping into bear territory. In reaction to this, the Fed is offering $500 billion in a 3 month repo operation. You can read their statement about that on the websitenewyorkfed.org.
Also we are seeing COVID-19 spreading more in the United States and it’s beginning to make an impact here. The US has added travel restrictions specifically ontravel from Europe to the US, universities are extending their spring breaks and moving to online classes, concerts and festivals are being cancelled or postponed, and the NBA has postponed their season.
This is the first time I’m doing an unscripted video. I have a few points I feel its very important to talk about and I wanted to get this video out there as quickly as possible.
First, I want to talk about emergency funds. We’re seeing right now, exactly why people need to have an emergency fund. What’s happening with COVID-19 is an example of why you need an emergency fund because there are people who are having their hours cut, there are people who are not going to be able to work their gig jobs. In this case, it’s important to have your 3 to 6 months of expenses saved, so that if you have your work hours cut, if you are going to have a drop in income, maybe you work in sales and your commissions are going to start going down over the next month or two. You want to have a backup plan, so that you can get by without going into credit card debt.
With the virus going around, we don’t know how many people are going to be infected by that, and how extreme those infections might become for some people. You might have additional medical costs that you could in no way anticipate.
I also want to stress, that I know we’re seeing the markets go down, and I know a lot of people are saying this is a great opportunity to buy, and it is a good opportunity to buy, but I don’t believe we are getting close to the bottom yet. I saw a comment on someone else’s finance video, saying that somebody was going to use their emergency fund money to put into the market to buy the lower prices that we’re seeing now. And you might want to do this with a small percentage of your money, but this person said that ultimately they were thinking of putting 100% of their emergency fund into the market. Now I don’t know that person’s exact circumstances, I don’t know if they have multiple sources of income, in which case they don’t have to worry so much about having a separate emergency that might cause them to actually dip into their emergency fund, but if you’re working one job, and there is any chance that your job could have the hours cut or you could be laid off, do not take money out of your emergency fund to put it into the stock market. I think that’s a terrible idea. Maybe if you have a large emergency fund, like $20,000 or more and you want to skim off $2,000, that’s fine. But do not liquidate down to nothing and put that money in the stock market right now. If you end up having to cover your monthly expenses because you can’t work, or if you end up getting sick, and you have to cover additional medical bills, you’re gonna want that emergency fund for your use, so you don’t go into debt.
I also wanted to share an update on some of my accounts from last year’s Grow Your Dough Challenge. In the Grow Your Dough Challenge I put $1,000 into some different investing platforms, after one year I compared the different platforms to see how each one did. All of my platforms except for Lending Club grew money over $1,000. In the last month, my Robinhood account has dropped 26%. This is the chart showing the drop over the last month. What started as $1,000 and eventually went around $1,100, is now down at just above $800.
So for you beginning investors, I totally understand. If you invested in the last year, all of your gains are probably gone, unless you were lucky enough to pick a few of the companies that seem to have not been hit with any of these problems. Or if it’s one of those companies people have plowed money into because they are doing research related to COVID-19. Or they are one of those recession proof type of companies that everyone just plows their money into as soon as things start looking rough.
I also wanted to share my Acorns account from the Grow Your Dough Challenge. That is now down to $1,695. Acorns is where they take money rounded up from purchases you’ve made, then they invest it into funds in the stock market. Now all of my money that’s been moved over is now actually at a loss. I’ve deposited $1,829 and I’ve lost $153 at this point. That’s not so good either.
The other account I wanted to talk about from the Grow Your Dough Challenge was Fundrise, which actually has held its value over this last month. So if someone is looking at a place to put their money right now, and you don’t trust what’s going on with the stock market, you might want to consider opening a Fundrise account. That’s not to say that Fundrise is going to be completely unaffected by this, it probably will get affected, but I have a feeling that is going to be a much slower impact and you might not see such an aggressive drop in your investment, that we’re seeing with the stock market right now.
If you saw my last video on the market correction from last week, with buying into the market as the prices were dropping, I pretty much exhausted the money that I had to do that. Except for on Tuesday I realized that there was a bond fund of mine in my IRA, that had increased in value. And I keep track of all my investments on a spreadsheet and I have notes attached to each one and on that bond fund I had a note that if it ever went over the price I paid for it, that I would want to sell it because it had a high expense ratio and in the last year it was starting to pay lower dividends than it had previously. So I was ready to get rid of that bond fund and I sold it on Tuesday (March 10) and then Wednesday I set up some limit orders to buy into my dividend ETFs. In this instance I didn’t use all of the money from that bond fund to do that, I used just under half of it and I’m holding on to the other half and waiting and seeing what the market is doing. But I did make purchases in 6 of my dividend ETFs that had the greatest drop over the last couple weeks. I bought between 10 and 40 shares in each fund depending on the price that each fund was trading at.
I’m not at this point planning on putting any more money into the market until I start seeing that it’s leveling off and even going back up. The main reason for this is that I am planning to start house hunting for my primary residence beginning in June. Hopefully in the year between June 2020 and about August 2021, I will be able to buy a property. Because of that I am trying to have more money in cash, I don’t want to put more money into the market right now while I don’t have any clue what it’s doing and I would likely need to be pulling it out in the next few months to pay for a house down payment.
I want to encourage everyone to keep in mind their financial goals as we’re seeing such volatility in the market. Remember to proceed with caution. I do realize that this is a much more somber message than I had in my last video when I was happy to be getting some deals but I feel like things are getting very serious now. And over the next couple of months things are going to be happening that we cannot predict. I think that most of us should be a bit more cautious, especially those who are getting closer to retirement age or those that have larger financial goals in their immediate horizon.
Thanks for watching my video. This is the first time I’ve done a mostly unscripted video, it’s very uncomfortable for me to do that because I am more of a writer than a speaker, and I have difficulty coming up with words sometimes, so thanks for your patience watching this. If you like the content that you’re hearing please like the video and remember to subscribe. I’ll be bringing more content on personal finance and personal growth in the future. And we’re gonna find out what I did with the E*Trade account that I had for the Grow Your Dough Challenge. I did some completely different things with it yesterday and I can’t wait to share my next video about that with you.
Disclosure:Information shared on Squintillions is based on the author’s own experiences, thought processes, and research and is not intended as professional advice. Please do your own research before committing to any investment! If you feel your personal challenges are beyond the scope of my suggestions or other self-help materials, please seek professional counseling.Further, there are some affiliate links and ads used in this website. If you purchase an item when following these links, I may receive a commission on your purchase.
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