Pandemic investing do’s and don’ts

Seven simple rules for investing success in tough times

For all of us, living through a pandemic is a new experience, and we have no experience to fall back on other than the Spanish Flu 100 years ago. But so much has changed since then, it is difficult to glean much knowledge from that time in history and apply it to our situation now. Not only do we have to get on with living, working, school, and everything else but we also must move forward with investing. And this is true if you are retired or working towards that goal. Here are some do’s and don’ts that may help you through this difficult time.

Pandemic investing “do’s”

Keep investing monthly. Do not stop these pre-authorized payments. Not only do you still need to save tax (through RRSP contributions, for example) but if markets drop or are choppy, which is expected, you can buy more units, which helps you move more quickly towards your goals

Monitor asset mix. Keep assessing whether you have the correct mix of investments. Have you been too aggressive or too safe?

Be a contrarian. If markets drop due to events during the pandemic, invest a lump sum, if you can, to take advantage of low unit prices and buy when others are selling and go against the herd.

Calibrate your plan. If your income(s) are down, decrease your monthly plans, but don’t stop them completely.

Pandemic investing “don’ts”

Panic selling. That involves selling everything and moving into cash. Unless you have a genie or crystal ball telling you when to buy back in, do not attempt this. If you can’t resist, do it with only a small percentage (20% maximum) of your portfolio and jump back in if there is a 25% or more decrease in the stock market.

Selling at the wrong time and not getting back in at the right time crystalizes your losses and may set you back five years or more in your plan. If you want to sell everything and move to cash, you are either invested too aggressively for your risk threshold or are not trusting the advice when you were given to begin with. If you were comfortable with your portfolio before the pandemic, why does the pandemic make you uncomfortable with the same stock/fund selection?

Frequent rebalancing. That too crystallizes your losses although not in as devastating a way as a move to cash. If you think you are or have been too aggressive, wait and rebalance slowly and don’t act rashly. It may have taken you 20 years or more to save this money and losing 25%-30% in a year or less would be costly in more ways than one.

Committing funds aggressively. If you have a lump sum and want to invest, do not go all in because we never know what direction this pandemic will take. The imminent U.S. election is another wild card, and we don’t know which way it will go. A contested election could place the U.S. in political limbo for months. The outcome is unpredictable and markets like certainty. Instead, invest your lump sum on a monthly basis – over, say 12 to 18 months to be conservative – to take some risk off the table.

Bruce Loeppky is based in Surrey, B.C. and is registered with Portfolio Strategies Corporation as a mutual funds person. He is a regular contributor to the Fund Library. He can be reached at sloeppky-1@shaw.ca.

Notes and Disclaimers

The foregoing is for general information purposes only and is the opinion of the writer. No guarantee of performance is made or implied. This information is not intended to provide specific personalized advice including, without limitation, investment, financial, legal, accounting or tax advice. However, please contact the author to discuss your particular circumstances.