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Financial Planning Index Funds and Stocks Post

Staying sane when the Stock Market Crash has eaten your savings!

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Couple of days ago I talked about Surviving Stock Market crash of 2020, the market, oil and bitcoin all are going down south. My portfolio is at -7%, 2.5 years of regular investing has vanished. It could simply go down further but it will not crush my Financial independence dreams.

How can I stay clam when the Stock Market crash has destroyed my savings?

I do not know the answer to this.

It is not easy to see our savings burn up in so quickly. It takes me several months to save up money and its not easy to see it simply burn away.

Prioritize your family’s safety first!

The Stock Market Crash was triggered by the coronavirus, this is a real health threat and we all are at risk.

Safety of your family comes first! If you are in an at-risk industry like travel, music, airports, restaurants or similar, you must first make sure that you have sufficient cash in case of a job loss or sudden medical expense is needed. This could be anywhere between 3-6 months of expenses. A Stock Market Crash often result in companies going down under, and an added threat of coronavirus will only make this harder to recover

Invest, only if you can stomach it and can stay put for a few years!

My favorite Financial independence author JH Collins wrote on his blog about the 1987 market crash and how he reacted to it. It seems to be a great idea to invest all surplus cash into the market, either through stocks or simply buying cheaper index funds.

At the same time, be aware of:

  • We don’t know what is the bottom (and when), so the stocks can continue to fall for next months (average bear markets last 4 to 11 months).
  • Companies will fail and die, so your bets might fall flat!
  • If you think recovery is quick, you might be surprised.

So, one of the ways to safeguard against the wobbly race to the bottom of the stock market crash is to invest in intervals. In case you have 2000$ to invest, instead of going all in a single day, average this out to say 100 $ per week for 20 weeks instead. This is DCA in a nutshell.

Don’t invest if…

  • You want the money back in 12-18 months
  • Your job can be at risk, be very aware
  • You are not comfortable, just don’t listen to an unknown guy’s blog post to do it if you do not believe in it.

Finally, keep calm and carry on. Sell if you feel you cannot recover at all, but before this please read this thread from 2008’s crisis! We aren’t the first ones facing this, and it isn’t the last Stock Market crash we’d see!

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