Categories
Financial Planning Post Rant

Ideas for Surviving job loss in the Corona recession.

Arbeitslosigkeit durch Corona by Zeit.

It is all very convenient to write as a blogger to invest the dips, and I did this too last week! Lets get real, we are facing a very high chance of recession and job loss soon. Thus surviving job loss is a very real theme for so many of us.

Why talking about surviving job loss and income loss is important, now?

As Germany crossed 10,000 Coronavirus cases this morning, we are heading for a complete shut down.

The fact is that retail shops, travel agents, salespersons, cooks, restaurants, waiters, their suppliers, airports, airlines, ground staff, freelancers, event management companies, movie theaters, arts and many more are at severe risk of losing their jobs. Globally the picture is no different and its already starting to get ugly for some.

We are going to face millions of job losses, crushed busines demand, and misery.

Even if this virus goes away as trillion dollars pump into the market, funding for dying companies, it will take years to recover. The Dow Jones has plumetted 2000 points today(had to change this while writing!) 33% less than all time high a month ago! A MONTH AGO!

All this, within 20 working days!

Surviving job loss: Emergency fund.

Every FI blogger has talked about it. For some of us, this is already too late. If you have already lost your job, income and do not have enough to cover then you must reach out for benefits.

If you are still in your job, fear the reduction of pay or job loss, this is the time to tighten your belt. However, If you are confident to ride through, go read another post.

  • Save everything you can, be super frugal, avoid any unnecessary purchases.
  • If you can save 6 months of expenses, try 8 months, if you can do 8 months, try 10 months.
  • Were you planning a apartment purchase? Delay it.
  • If you were planning to get a car, even an old one, delay that!
  • Do not invest in the market, stay away and hold cash

Surviving job loss: Arbeitslosgeld

There is no shame in this, you have been paying into the social security for times like these. As things escalate, more people will seek this and there will be delays in handling all the capacity.

Please visit the Arbeitsagentur website (in English too). You must immediately inform them of a job loss as soon as you know have a confirmation from your employer. You can also call at +49 (0)800 4 5555 00

Please make copies of your payslips, bank statement, resume and existing job contract ready. You will need those.

Surviving job loss: Fix your living situation

The next advice is not for all, neither is something I prefer. If push comes to a shove, find a room-mate to share rent, or move in with your family.

Surviving job loss: German Governents loan scheme

Over 2.3 million people work as self employed, they are at significant risk. There is a high chance there will be a scheme to help them through a 0% loan or more. I will update this post, when this is concrete.

PS: The worst part of writing this post was that coronavirus numbers went up by 1500 since I started writing, and Dow plunged from 1000 to 2000 points in the same duration. Also, I am searching for more sensible solutions if you have some.

Categories
Financial Planning Index Funds and Stocks

Survival guide to the 2020 Stock Market crash

not stonks meme
Not Stonks!

Today after three weeks of volatility, the markets, oil and bitcoin are all in a free fall. An year ago I had talked about the impending recession and the market was going all up! This morning we have the first red signs of the 2020 Stock market crash, some already call today as the Black Monday. Within last 2 weeks, my gains from 33% have come down to 6% this morning, and can go lower.

In 2008/09 I was still studying and was not an investor. If you are like me, then this is the first time for you to go through this. I am penning down three potential approaches which make up this survival guide to the 2020 Stock Market crash.

Tip #1: Book profits now, enter the stock market at lows

This is brilliant advice, follows on the famous Buffet quote,’Buy when market is in fear and sell when its greedy.’ The only challenge is, when to exit and when to enter?

If you think you can do it, then sell and book profits, use stop/loss specially for stocks and wait on. However, nobody knows when you hit the bottom of the 2020 stock market crash.

Tip #2: Stay Put, Time in the Market is more important than Timing the Market!

Solid advice again, most FI bloggers will keep repeating it ad infinitum. There is value in it, there is a great reddit thread which I can suggest you to read.

The underlying belief is that if you continue buying at fixed intervals you will still benefit from the low prices of stocks (averaged out or DCA). Of course, the argument to that is that when stocks are cheap, why not buy more? Afterall, a stock market crash is an opportunity!

And then, there have been so many articles which always talk of a person investing in Market crash of 2008 and then becoming rich, that sounds like timing the market and not staying put.

Tip #3: Stay put, and yet try timing the Stock Market!

This is going to be my approach, and I do not have a lot of spare money just 4-5k EUR which I can time with! It won’t make me a millionaire.

  • I will continue staying put i.e. the long term index funds will continue to be invested automatically, as always planned inspite of the 2020 Market crash.
  • I will spend my spare cash into buying some handpicked stocks which I felt were overpriced, these are mostly large caps and also long term plays. My target price usually is that if my preferred stock is 30-40% cheaper than ATH, it can be a buy.
  • I will not attempt to make short term gains, and that is beyond my risk taking capacity.
  • I recognize the risk that companies I invest in, might go under or not recover for a long term.

Caution: We tend to look at history of stock markets and its rebound to look for recovery. Markets like Japan’s Nikkei was at 27000 in 1991, and after recessions/stagflation, even in 2020 it could only reach a high of 24000. So, beware of confirmation bias.

Nikkei was at 27000+ in 1991, it never got to the same level in 29years!

What is your approach for the impending sell off? Join me on twitter if you want to hear more from me : GetFI Twitter

Categories
Financial Planning Index Funds and Stocks

Will the next recession be the end of Financial Independence movement?

I had reserved my second blog post for sharing more about me and where am I starting from in my Financial Independence journey. However, an event much more important has occurred which may impact almost everyone planning for their FI.

Last week on Friday, the long term interest rates on US Bonds fell lower than the short term interest rates. This event, has been a precurser, to every recession in US in the last 60 years. Naturally, this has triggered a recession risk with analysts guessing that a recession is imminent in the next 6-24 months (thats a very wide range of time!!).

As the warning has been triggered, there is already a slight panic and selloff has intensified, across the globe. At the same time some academics and analysts are trying to cull the panic to say that this has not happened consistently for a longer period of time and may not mean a recession is near.

In any case, lets assume that the predictor will hold and we are heading towards the cliff. This means that the market should head for a correction of 20-40% at its worst. This will dip the stocks or index funds invested by this community of Financial Independence aspirants.

Lets look at the illustration below, the VTI was trading at its highest in 2007 (just before the last recession at 74.5 US$ and it fell down to 46.11 US$ on 17 October 2008, and then further to 34.06 US$ on 6 March, 2009. It then needed almost 5 years to reach its old heights in 2013.

The question now is, is it a good time to sell and make profits OR it is just wise to stay on track and not blink as we hit the iceberg?

Its impossible to predict when will the recession risk will or how deep will it be. In the end one needs to think on our feet and act accordingly.

Cheers!