Financial Distancing

Financial Distancing

| March 19, 2020

My, how times have changed. Parents used to order kids to go out and give their phones a break. Now we have to tell them to stay inside and message their friends all day. I’m seeing memes that say, “Introverts, put down your books and check on your extroverted friends. They are not okay.” As hilarious as that sounds, there’s also some truth to it. This social distancing is tough. The longer it’s been since our 22nd birthdays, the tougher it feels to stay isolated and work/study/kill time on devices.

            Today’s teens might be the most responsible and engaged group we’ve seen in generations. But they know how to distract themselves online a lot better than their parents. When we self-isolate, we go straight to the news to burn some time. Whoops. Bad idea.

From “meh” to “hmm”

            In my last column, I reminded readers that the market has seen volatility before. Eventually, it got its yayas out and went on to make new highs. My reaction to all this volatility was a big, heartfelt “Meh.” But feelings evolve. I’m more excited. Now I’ve gone from “meh” to “hmm.” The same companies everyone loved so much two years ago are cheaper. So much cheaper that the question on my mind is, “What would Warren (Buffett) do?” The answer, I suspect, is deploy capital towards all those bargains.

            But that’s me. Everyone has their own unique financial dashboard. Some people can’t afford to take too much risk and others don’t have to chase the highest returns. Quite a few people simply hate risk and seeing their accounts go down, however briefly that might be. The role of a wealth advisor is less a race car driver than a chauffeur. We should drive where you tell us to drive.

            If you’re about to tell your chauffeur to pack everything in the car and step on it, or if you do your own investing, and you just put the pedal to the metal, you aren’t practicing financial distancing. Step away from the financial websites. If you’re focused on the long term, then, believe it or not, this is still a blip. One heck of a blip, but still a blip. If you were investing for a short-term goal (say, shorter than a few years), then it might not be as short term as it was before.

            Don’t ignore your account statements or throw them out. That’s foolhardy. But do keep everything in perspective. If you look at a daily chart of the S&P 500, the market looks as if it’s falling off a cliff. But if you look at a ten- or twenty-year chart, the market looks like…well, not fantastic, but not fatal, either. The further you step away from the moment, the more you’re practicing financial distancing.

Practicing financial distancing will give you the benefit of history without the inconvenience of piling up experience. Certainly, the past doesn’t predict the future. But it can give us that necessary emotional distance to carefully make decisions that will affect our financial futures for years to come.