Brave Investing in Tough Times

Brave Investing in Tough Times

| April 09, 2020

Here’s to the first responders, the doctors, the nurses, the aides and the orderlies. And thank you to everyone working the night shift at grocery stores. And we’ll always be grateful to the mail carriers, warehouse workers and anyone else who is keeping this behemoth society functioning.

But, let’s also recognize all the parents who have never had to craft a lesson plan until now, the grandparents who are putting aside their dreams to make sure their grandchildren have meals and, especially the people who are just quietly trying to hold themselves together while their worst fears have been coming true.

We’re all heroes, even those of us who are making it through this challenge, well, imperfectly. Forgive yourself. This isn’t a time for thriving or peak performance. This is a time that calls for endurance and self-care.

But, “Why bring this up in an investing column?” you might (reasonably) ask. I’m doing that to encourage you to invest bravely as well. Quite a bit of economic theory relies on an assumption that investors will always make rational decisions, at least on average. But we’re not all average, nor does everyone act rationally all the time. This is the time that your investments could benefit from some brave moves. Maybe it’s a terrific opportunity to reduce your capital gains taxes by harvesting losses, or maybe stocks have fallen to the point where you told yourself you would buy in. Maybe your portfolio has fallen to the point where you can’t afford risking further declines and the brave thing to do is to take a step back and let someone else take the risks for a change.

When markets become as volatile as they have been, investors can justify virtually any action they want to take. Bears will say the economy is in free fall, bulls will announce the worst is behind us and begin counting on a rebound. Investors can cherry pick facts as easily as any politician. Instead, I’m asking you to be brave enough to question your emotions and your assumptions at this critical time. If you find that difficult, find an expert who will listen to you and offer you options that you might not be aware of.

These might turn out to be the best of times or they might continue to be some of the worst. It’s hard to imagine this being an absolute bottom for the markets, but it was also hard to imagine being at a bottom in March of 2009, when the S&P 5001 was at the lowest level since 19952. The Guide to US Recessions, written by the Capital Group3 is an easy to read document illustrating the lows, recovery times, best performing sectors, and much more to educate you on how to be brave.

As I write this, there are signs that the rates of infection just might be slowing4. We will know shortly if that’s a trend or an aberration. But this is a time for action—or, if you are perfectly positioned, then informed inaction—and that requires bravery. So, though I’m not speaking of the kind of daily heroics of those people who keep us safe and society functioning, I am reminding you to be a brave investor.

1The S&P 500 is an index of 500 major, large-cap U.S. corporations.  You cannot invest directly in an index.