Your options during the 2020 stock market crash

What do I do? You constantly look at your portfolio and all you see is red. That’s the reality of the past two weeks with the coronavirus (COVID-19) outbreak causing not just widespread fear for the virus, but also for the stock market.

If you don’t want to read the rest of the story, the simple recommendation is: do nothing.

Here is what you might feel like you should do:

1. SELL EVERYTHING. The world is falling apart like never before. No one could’ve predicted such an outcome. If I sell my portfolio right now, I can cut my losses and avoid subsequent drops in price!
2. BUY EVERYTHING. I saved up a little bit of cash on the side because I always knew the stock market was at an all time high. Right now is the time to put all the money I’ve saved into the stock market!
3. DO NOTHING. Hey, let’s ride the waves up and down. I understand there are waves, but if I’m holding on to my investments for the long term, it doesn’t matter what price they are at today.

While there are other alternatives, and I can’t tell you what you should do, I’ll tell you what I’m going to do and why. I’m choosing option 3 to do nothing at all. Each month, I’m still going to take the same x% of my paycheck and invest that into a common 3 fund portfolio distribution, I’m still going to keep my 1 year expenses cash fund in cash (of course in a high yield savings account) and I’m not going to make any rash choices like taking out a loan to buy more stocks.

Here are my reasons for doing so:

1. We can’t predict or time the market. It’s been shown over and over again, that whether the market goes up or goes down is very unpredictable. If it was predictable, and we could account for all the factors, someone would’ve made an ML trading bot that has accounted for all the stock market and external factors and would never ever lose money in the stock market. There are unfortunately, not only too many factors to consider, but also the very common introductions of new unaccounted for factors (9/11, COVID-19, etc.). No one can tell you if stocks are going to go up or down tomorrow, despite what you or they may think.
2. Unless you’re very close to retirement age, we are buying stocks for the long term. There are two quotes that I’d like to share with you from Warren Buffett himself:
   1. During a CNBC interview at the start of the 2020 market decline, he said

      We’re buying businesses to hold for 20 to 30 years.. We think the 20 or 30 year outlook has not changed by coronavirus.

   2. Unless you can watch your stock holding decline by 50 percent without becoming panic-stricken, you should not be in the stock market.

Though do keep in mind, these options are right for me, and are probably right for the majority of everyday investors. If you do want to be a little more risky, I don’t think it’s a terrible decision IF you have money sitting around just for this reason to buy more of the stock market, or to rebalance your portfolio slightly IF you do have a heavy bonds position, as long as you are not making extreme decisions because of a relatively minor decline.