This, Too, Shall Pass...On to the New Normal
- InvestmentsAs I write this from Kirkland, WA, the original epicenter of COVID-19 in the US, we are in the midst of a lockdown and hopefully at the peak of our daily death toll.
I say this because someday, as unlikely as it may seem, many of us we will look back on this time and see only a faded memory. You may be reading this now and thinking, “Oh, yeah! COVID-19. I remember having to stay inside, and my friend Nick got really sick, and just going to get takeout was a big deal.”
Everyone is writing about COVID-19 right now, with facts, fiction, tips, hysteria, and predictions. I won’t break trend here, except that I won’t do the fiction or hysteria. My thoughts, as usual, will focus on the positive AND I acknowledge the fear, pain, and loss people are experiencing. I have every confidence that we will bounce back from this socially, economically, and maybe even politically. So let’s focus on some interesting discussions I’ve been observing and some shifts we may see after our splendid isolation.
How will our use of technology change in light of COVID-19? We’ve all seen the explosion in videoconference and video chat tools. Many of you are helping your parents and grandparents figure this out for the first time. Gaming is also doing well in this environment.
Space Doctors, a brand and business consultancy firm, recently took these ideas a lot further. They see our entire culture of technology shifting in a few ways:
1. Ground-Up Repurposing: people are co-opting technology for purposes outside their original intent. I was surprised to find that people in China have been using Tinder to get news about the COVID-19 situation, in order to get around their government’s information controls.
2. Playful Performativity: most of us are on-screen a lot more than we ever used to be. The trend is to ham this up a bit by adding fun backgrounds or turning ourselves into pickles using SnapChat, to cite just a couple of examples. We have permission to do this given the dire situation…AND it helps us cope through humor.
3. Navigating the Challenges of Community: as you may have observed, online groups are popping up based on local geography rather than affinity. We’re seeing more community and neighborhood groups instead of focusing only on people who are very much like us. These proximity-based groups cut across ideologies and invite the “other” into our insular worlds.
So hopefully this means our relationship with technology is getting a bit more flexible, silly, and inclusive. That’s not so bad, right? Why not take some of these trends into the post-COVID world and lighten up a little? Get a little more connected?
What in the world does any of this have to do with money? Not a whole lot. But since you ask, let’s talk about money for a minute. I’m not going to tell you to lighten up about your money; you are allowed to be scared. I would just encourage you to allow that fear to paralyze you to the point where you don’t make any drastic changes to your investments right now.
“What”???!!! You shrieked. “You are actually telling me to let my emotions guide me”? In this case, yes, I’m going to give you that, as long as your emotions stop you from doing anything at all. Here’s why: a behavioral finance expert analyzed a ton of data from a brokerage house after the bloodbath that was 2007 – 2008. He (and Vanguard) found that a big group of people who manage their own money did NOT panic and sell stocks during the downturn. They did absolutely nothing. Another big group actually bought stocks, because face it, everything was on mega-sale. Half-price mutual funds! Get ‘em while they’re hot! So yes, I will also approve stock mutual fund purchases at this time.
Back to the “holders”: we don’t really know that they were panic-stricken and that’s why they held. But we do know that their investments performed just as well as Vanguard’s benchmarks for Target Date Retirement Funds over that same period of time. The only people who did worse than the benchmark were the ones invested in cash the whole time.
The moral of the story is: don’t be invested in cash the whole time. If you are retired, then sure, you might want to keep a year or two of extra cash on hand in case you have to ride out a downturn. You may also want to reduce expenses for a while. But if you’re a young geek in the full blossom of employment, just panic as much as you need to, take a few deep breaths, and hold on tight. It’s going to be a bumpy ride but you will be OK. Do nothing. This, too, shall pass, friends.
Take care of yourselves and be excellent to each other!
