We have to acknowledge the short-term pain felt by long-term investors when financial markets tank.
You can’t explain away the stress of daily stock market plunges by telling people to keep a long-term perspective. The anxiety felt in the current market upheaval is all the more intense because it was triggered by a virus that is spreading quickly around the world. Stress is coming in stereo these days.
Let’s look at some things you can do to limit financial stress. One is to stop endlessly checking what the stock markets are doing. A rapidly plunging market sends a message of crisis. Spare yourself. Check in once a day or less, and remember what has happened in previous stock market declines. Stocks find a bottom and then rally. The market does not go to zero. It bends, but never breaks.
Also, stop checking your portfolio online all the time. Current losses are no more indicative of your results than the peak of the market numbers you were looking at a month or two ago.
Another tip is to not equate what the major stock indexes are doing with what’s happening in your own investment portfolio. Bonds are soaring in prices these days as stocks fall. You’re still losing money if you have 40 per cent of your portfolio in bonds, but the damage isn’t as severe as if you were 100 per cent exposed to stocks.
One more tip is to focus on developments that can actually help your personal finances. Falling interest rates are a sign of stress in the economy and concern about a recession. But they also mean a lighter interest burden on people carrying debts. The interest rate on your home equity line of credit and/or variable rate mortgage should have fallen 0.5 of a percentage point as a result of an interest rate cut by the Bank of Canada last week. More cuts could be coming.
If you have a mortgage coming up for renewal or need to refinance your mortgage, falling rates will save you money. My colleague Rachelle Younglai has reported on how lower interest rates have sent the mortgage industry into a frenzy, as homeowners and buyers race to take advantage of cheaper loans.
Gasoline prices are falling as a result of a big decline in the price of oil, which is bad news for the finances of the entire country and not just energy-producing provinces. But lower gas prices do lighten the load on financially stressed households. GasBuddy.com says the average price of a litre of gas across the country has fallen about 7 per cent in the last month.
The daily flow of bad financial news will continue a while longer. Find your zen in the short term and remember that the long-term view on your investments is always better (really).
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Rob’s personal finance reading list…
What to do on Day One of your retirement
Solid advice here. Follow the three C’s of retirement: Clean you your closet, cultivate your curiosity and coast.
How to disinfect your phone
Thanks to the coronavirus, people are paying more attention about stopping the spread of germs. Here are some thoughts on disinfecting your phone without damaging it.
The ins and outs of RDSPs
A helpful primer on registered disability savings plans, which are designed to help build the financial security of someone who is disabled. RDSPs are somewhat similar to registered educations savings plans in how they work. For example, contributions to an RDSP get you a matching grant of federal government dollars.
How to avoid rental fraud
Fake landlords with fake leases. You pay your first and last months’ rent, and the money disappears. More of a concern than ever with tight rental markets in some cities.
Today’s financial tool
Free apps that pay you to scan your grocery receipts.
In case you missed these Globe and Mail personal finance-related stories
- Take advantage of tax changes this year
- Fixed or variable? The coronavirus crisis has made one the better pick for mortgage shoppers this spring
- Gordon Pape’s mailbag: Seeking options amid coronavirus turbulence, cash in RRSPs and other investment advice (for Globe Unlimited subscribers)
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Rob Carrick