Holding Cash Until Coronavirus is Settled

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JustAGuyReally
Posts: 21
Joined: Wed May 10, 2017 3:31 pm

Holding Cash Until Coronavirus is Settled

Post by JustAGuyReally »

Greetings all,

Newbie investor question for everyone!

I'm paid by the hour and make a slightly variable income month-to-month because of overtime. As such, my investments aren't automated and I'm manually moving money into my Vanguard account every payday.

Due to circumstances beyond my control, I was unable to invest on that Thursday/Friday when the market took that initial coronavirus dip... I didn't invest my paycheck from this week, either.

My question: Do I continue holding my cash until we know how coronavirus will affect the markets?

Is this timing the market?

Or am I logically looking at the global economy in the midst of a worldwide pandemic and playing not to lose? Just wait-and-'seeing', so to speak...

What do you guys think?

ertyu
Posts: 929
Joined: Sun Nov 13, 2016 2:31 am

Re: Holding Cash Until Coronavirus is Settled

Post by ertyu »

1. This is timing the markets.

2. The fact that it's timing the markets doesn't make it inherently bad. You can absolutely form an educated opinion about the likely course of future events and let that inform your investment decisions. "Don't time the market" is a guideline, not religious dogma thou shalt not sin against. If you have a pandemic on the move and the US is woefully unprepared for it, I would only expect the death toll to rise. Give it a month or two

Disclosure: I'm in cash. Further disclosure: Knowing this doesn't help you much because I'm an underinvested chicken at the best of times, let alone now.

HalfCent
Posts: 53
Joined: Mon Dec 23, 2019 8:56 pm

Re: Holding Cash Until Coronavirus is Settled

Post by HalfCent »

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Last edited by HalfCent on Wed Apr 22, 2020 12:52 pm, edited 1 time in total.

JCD
Posts: 50
Joined: Sat Jul 20, 2019 9:12 am

Re: Holding Cash Until Coronavirus is Settled

Post by JCD »

You have a variety of options you can take, depending on your situation:
1. Keep investing and use dollar-cost averaging to protect you.
2. Time the equity market, guessing the bottom.
3. Pick specific stocks you think will do well or less bad (e.g. Remote work, Streaming, Gaming)
4. Pick stocks that have taken a beating (e.g. Cruise ships) and maybe cheap or have high dividends (even if you know there is a risk they will be slashed).
5. Invest in bonds, gold or bond-like assets (e.g. REITs are highly leveraged and depend on interest rates for profitability)
6. Short equities.
7. Speculate on commodities based upon virus fears (e.g. Demand for oil will go down due to less travel)
8. Sell put options with some discount rate to take on stock in the future with a known price (attempting to price in the virus) or sell call options if you already own stock, depending on strategy (see viewtopic.php?f=3&t=11230 ).
9. Picking countries that seem to have less virus exposure or seem to have a better response.
10. Buy call options if you think the virus reaction is over blown, but you don't want to risk all your money on a single bet.

This is not a complete list, just some obvious options. How skilled you are, how fearful you are, how likely you might need the cash, etc. are all elements of context you must judge for yourself. They will help determine which strategies are within your strike zone. Don't take on strategies you don't feel comfortable with, unless it is for learning purposes (with minimal money involved).

I have personally taken a mix of 1, 3, 4, 5, 8. I still have ~30% of my total holdings in cash, bonds or gold, even after opening fairly large option positions. My goal is to move into 90% equities once I think we hit something near a bottom.

My questions for you are:
  • How much do you currently have invested as a percent of your goal?
  • How much are you willing to lose in a year as a percentage of your portfolio, as a percentage of your expenses or as a percentage of your yearly salary?
  • How much cash do you feel the need to have on you to feel safe and secure?
  • How afraid are you? Will you lose sleep at night over this week's pay being invested?
To give some context on how at least one other person has dealt with this issue, let me capture my answers to some of these questions, which I asked myself some time ago.

How much are you willing to lose in a year as a percentage of your portfolio, as a percentage of your expenses or as a percentage of your yearly salary?

At one point this year I lost nearly a year's worth of expenses from the high. I only stopped investing because I want to DCA to some degree. If I still had a job I'd probably invest my entire paycheck in every two weeks, using laddered options, so that I'd get paid by someone else to take on the risk. This would not bother me.

How afraid are you? Will you lose sleep at night over this week's pay being invested?

Even if 100-200 million people die (a reasonable guess at a "bad" scenario; 3-6% death rate of 40-70% of the world population), the economy would not be over and would eventually recover. In fact, social security might become solvent again, since the elderly tend to die, much of the retirement crisis might improve and global warming might improve too, even if only for a while. If I'm dead, oh well, no economic loss matters. If I survive it might be emotionally be hard, but the economic issues seem like the least of my concerns, as the world picks up the pieces. Afraid, yes, but not of economic outcomes.

You need not answer these questions here, but asking them and looking into yourself and your situation will be a big part of answering your own question.

thrifty++
Posts: 1086
Joined: Sat May 23, 2015 3:46 pm

Re: Holding Cash Until Coronavirus is Settled

Post by thrifty++ »

I think its timing the market. I have stupid amounts of cash sitting around so I was planning to move it and still will, regardless of Covid19. But, I think at the moment that should be balanced with a higher emergency fund in cash than you normally will, to see it through to the end of the bumpy ride, like 6m to 9m perhaps, in case you loose your job or something, so that you don't have to sell stocks in a downturn.

The other question I am thinking of is whethr I should be holding some actual physical cash at home. I have decided that I will, but will only slowly build up a gradual amount over time.

JustAGuyReally
Posts: 21
Joined: Wed May 10, 2017 3:31 pm

Re: Holding Cash Until Coronavirus is Settled

Post by JustAGuyReally »

"Don't time the market" is a guideline, not religious dogma thou shalt not sin against.
Great point, and duly noted.

If you have a pandemic on the move and the US is woefully unprepared for it, I would only expect the death toll to rise. Give it a month or two
Yes -- I suppose that's my thinking -- and perhaps how I should've framed this discussion. I'm really curious about how ERE folks think corona will affect the market here through the next 18 months.

From an investment standpoint, I actually sort've overlooked the unpreparedness of the US when it comes to figthing the virus from a medical standpoint. My reluctance to invest right now stems more from a Chinese export/manufacturing/supply chain angle. My understanding is is that we won't see the affects of COVID on manufactured goods until at least Q3 of 2019. If the markets are down because we are already having difficulty managing the spread of the virus, will the markets go down further when there's not enough new trinkets lining the shelves later this year?
Disclosure: I'm in cash. Further disclosure: Knowing this doesn't help you much because I'm an underinvested chicken at the best of times, let alone now.
No,it all helps, thanks. I'm new to the investment game and am eager to learn about how other investors are navigating this.
This is gonna sound crazy but I feel like I've prepared my whole life for this kind of event. Not in terms of disaster prep, but in terms of being a homebody gardener freelancer creative semi introvert. I usually berate myself for not being "out there" hustling day and night by land and sea but right now it's a delicious feeling of not having to travel, not having cancellations, etc. I can just hole up where I am happy.
This is great, ha ha! :lol:
I survived 2008.
As did I, but I lost a significant portion of my college account money just months before I graduated high school. :roll:
Am continuing my investment plan.
Do you think the stocks you're invested in have hit their 'bottom'? Or do you expect them to drop in price even further if COVID continues to spread?

I guess the 'time in the market is more important' crowd would argue that it doesn't matter, you're gonna keep the cash invested for the next 30 years anyway.

JustAGuyReally
Posts: 21
Joined: Wed May 10, 2017 3:31 pm

Re: Holding Cash Until Coronavirus is Settled

Post by JustAGuyReally »

Thanks for the great posts, JCD and thrifty. I'll respond tomorrow in detail. Can barely keep my eyes open! Cheers,

HalfCent
Posts: 53
Joined: Mon Dec 23, 2019 8:56 pm

Re: Holding Cash Until Coronavirus is Settled

Post by HalfCent »

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Last edited by HalfCent on Wed Apr 22, 2020 12:55 pm, edited 1 time in total.

HalfCent
Posts: 53
Joined: Mon Dec 23, 2019 8:56 pm

Re: Holding Cash Until Coronavirus is Settled

Post by HalfCent »

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Last edited by HalfCent on Wed Apr 22, 2020 12:51 pm, edited 1 time in total.

Nomad
Posts: 303
Joined: Wed May 16, 2018 5:23 pm
Location: UK

Re: Holding Cash Until Coronavirus is Settled

Post by Nomad »

@halfcent
which stock?

HalfCent
Posts: 53
Joined: Mon Dec 23, 2019 8:56 pm

Re: Holding Cash Until Coronavirus is Settled

Post by HalfCent »

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Last edited by HalfCent on Wed Apr 22, 2020 12:51 pm, edited 1 time in total.

jacob
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Re: Holding Cash Until Coronavirus is Settled

Post by jacob »

In the US, you can use short term losses to offset short term gains. If you still have something left, you can use the remainder to offset long term gains. And if there's something left after that it can be used to offset ordinary income up to $3000.

HalfCent
Posts: 53
Joined: Mon Dec 23, 2019 8:56 pm

Re: Holding Cash Until Coronavirus is Settled

Post by HalfCent »

Thank you! I feel somewhat star struck to get a reply from you, @Jacob! :D

Michael_00005
Posts: 98
Joined: Thu May 04, 2017 12:26 pm
Location: East coast USA

Re: Holding Cash Until Coronavirus is Settled

Post by Michael_00005 »

I started moving out of the market Fall, 2019, and then was completely out Jan. 2020. While I still like some global index funds like EWU, the thought was to only play the dips in the US market given high valuations.

While it was mildly difficult to sit out the gains of the last few months, it seemed reasonable we would get one or more nice dips in the market this year. I'm going from 0% invested today (Monday 3/9) to around 15% buy in as the market implodes. So gradual purchases this month (in a probable declining market), potentially moving 60-70% in over the coming month.

I"ll have to say it's really nice to have money sitting on the sidelines when the market crashes. Interests are world index funds, airlines like AAL (PE=4), and wfc or BBVA are tempting... actually there 's a lot of interest.

The coronavirus is likely a big deal until people realize almost everyone is going to get it... this should happen over the next 1-2 months. And BTW we don't need vaccines, the best defense, as with everything in our body is a strong immune system. Build up your immune system with plenty of fresh fruits, vegetables, exercise, drink lots of water and stay rested. Avoid or reduce: alcohol, drugs, smoking, processed food, meat, and over stressing the body. "Supplements" offer little to no benefit, so it's best to avoid those as well.
Last edited by Michael_00005 on Mon Mar 09, 2020 2:41 pm, edited 7 times in total.

Peanut
Posts: 504
Joined: Sat Feb 14, 2015 2:18 pm

Re: Holding Cash Until Coronavirus is Settled

Post by Peanut »

@Guy: CV has started to affect the markets. Perversely, CV presents a great opportunity to time the market. But JMO I think it's early still to buy. I'm waiting for the second or third drop of more than 5%.

bostonimproper
Posts: 213
Joined: Sun Jul 01, 2018 11:45 am

Re: Holding Cash Until Coronavirus is Settled

Post by bostonimproper »

I'm waiting until (a) djia drops to 18000, (b) governments have found a way to proactively distribute prophylactic antivirals, or (c) q2 earnings have been released and first sweep of corporate bankruptcies have hit the market. When one of these happens, I'll consider going back into equities.

Michael_00005
Posts: 98
Joined: Thu May 04, 2017 12:26 pm
Location: East coast USA

Re: Holding Cash Until Coronavirus is Settled

Post by Michael_00005 »

I took some gains today on my AAL, and WFC, 15% jump in one day for AAL is crazy. My guess is a choppy market with some good down days ahead... where I will be buying.

Lovin airlines at these prices, unfortunately my 401k does not allow purchases there.

ertyu
Posts: 929
Joined: Sun Nov 13, 2016 2:31 am

Re: Holding Cash Until Coronavirus is Settled

Post by ertyu »

@Michael wait for airlines. this shit's gonna get worse in a month

Michael_00005
Posts: 98
Joined: Thu May 04, 2017 12:26 pm
Location: East coast USA

Re: Holding Cash Until Coronavirus is Settled

Post by Michael_00005 »

@ertyu, your probably right. Patience is good advice, but it also happens to be one of my greatest weaknesses:) But in either case the stuff I'm buying at current PE ratios feels like a great bargain so there is no fear for long term losses.

In the past I've always been too heavily invested to take much advantage of deals like this. It's a good lesson if you were over invested this time around in the market. Having some free capital while prices are high (especially US markets) is invaluable!

I sold back 1/3 of my "in" position on yesterdays gains. But back in again with today's drop. If it continues to fall from here, it will be hold, and buy in increments.

newhorizons1
Posts: 3
Joined: Mon Feb 10, 2020 2:56 pm

Re: Holding Cash Until Coronavirus is Settled

Post by newhorizons1 »

I'm not sure what it is exactly that you do for a living, but considering the possibilities as far as disruptions to businesses of all kinds, it might not be a bad idea to hang on to your cash just so that you will be able to pay the bills if you company decides it has to do some layoffs or leave of absences. I know I've already started doing that. I was planning on paying ahead on my car loan, but I'm gonna hang on to that extra bit of savings for now.

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