You never know what life can throw at you… That’s why you need cash.
That’s what I wrote last month – before the coronavirus pandemic took a sledgehammer to the global economy.
The Dow had its largest single-day point drop on Monday. And since February 12, it’s down 31%. From their highs around the same time, the European and Asian markets are down 35% and 24%, respectively, too.
The outbreak has caused massive disruptions for everyone… Even PBRG staff at our Delray Beach, Florida headquarters are working remotely indefinitely.
Today, I won’t provide you with a series of predictions or best guesses for the year ahead. We’re in uncharted waters. No one can really provide answers yet.
But it is clear we’re likely headed for a recession.
So what I want to share is how we’ll handle this unprecedented crisis at PBRG…
Put Aside This Much Cash
Look, we know times like this can be stressful. The coronavirus has the markets and entire communities on edge.
But history proves that these sell-offs are temporary – and the market will eventually rebound.
And if you follow our asset allocation and risk-management guidelines, you’ll emerge on the other side of this pullback in a much stronger position than you’re in now.
You see, the long-term trajectory for the stock and crypto markets is up. So don’t let this temporary setback deter you from the bigger picture.
This may sound like cold comfort in extreme times. But remember, the sun will rise tomorrow.
In the meantime, one of the best things you can do is hold cash…
At PBRG, we recommend you keep up to 10% of your portfolio in cash. That includes checking and savings accounts, money markets, CDs, and certain cash-like ETFs and mutual funds.
You should always keep some cash on hand. Whether it’s for an emergency, a bear-market buying opportunity, or something else, you’ll be glad you had some.
Now, we understand not everyone is in the position to raise 10% cash or already has that much cash on hand.
In that case, Palm Beach Insider editor Jason Bodner recommends the following…
We all have to be home for a while. And there’s big fear about what will happen to businesses, both big and small. But you need to take care of yourself and your family. So look over your budget and find areas where you can trim and save.
Even if it’s just a little, reserving some cash is just one action you can take during crises like we’re seeing today.
But the most important thing you must do now is stay rational…
No amount of risk management or asset diversification will matter if you don’t make rational investment decisions. (This goes for your other life decisions during this crisis, too.)
The first thing we have to accept is that this sell-off will be painful. We could see the market drop 40–50%, or more, before this pandemic is over.
But as Daily editor Teeka Tiwari says, the market is self-healing…
I’m one of the most conservative investors I know… Yet my losses over the last three weeks are now over $1 million. Sure, they’re unrealized losses. But I can’t stop myself from thinking of what else I could be doing with that million bucks…
There are some questions we should not ponder. And this is one of them. As long as you’re using sound investing methodology, correct position-sizing, asset diversification, and minimal to no leverage… there’s no profit in diving into the well of “what ifs”…
You’re likely to emotionally drown yourself in self-recrimination. Worse, you may financially drown yourself with panic-based decisions.
Teeka recommends you sit still during this period of market volatility. As he points out:
So even if we end up dropping 40–50% – or more – during this market crash like we did in 2008 (and I want you to know that is absolutely possible)… the long-term compounding power of stocks will come to your rescue – as long as you stay rational.
Now, we all need to take this very seriously. We should follow the CDC’s recommendations… wash our hands frequently for at least 20 seconds… and avoid crowds and traveling.
But we don’t have to be paralyzed by fear.
Remember, the best thing you can do right now is just hold still until this carnage is over. And in the meantime, enjoy your family and live your life…
Managing Editor, Palm Beach Daily
P.S. Just like with stocks, the forced selling in cryptos is giving us a perfect entry time into this market.
Teeka says it all has to do with two forces coming together in 2020 that’ll create the perfect environment for you to potentially turn a handful of $500 investments into as much as $5 million.
And on Wednesday night, he chartered a private jet to cover his tracks, so he could show you actual proof of the demand headed into crypto assets – that could make you $5 million richer.
Right now, no one outside of a handful of well-informed billionaires and venture capital investors believes crypto will be anything more than a backwater playground for tech geeks.
But if you want to make truly life-changing wealth, Teeka says you have to bet in the opposite direction of the crowd. And right now, the crowd is convinced crypto is finished.