Doctor: Keep your money safe during the current financial crisis

As a result of the worldwide coronavirus pandemic, we’re now in the midst of a continuing stock market crash. On March 11, the Dow Jones dropped to a point that signaled it had entered a bear market, ending an 11-year bull market streak. The lowest point (so far) occurred the following day, “Black Thursday,” which saw the greatest single-day percentage loss in the US stock market since the 1987 stock market crash.

The next day, US Treasury Secretary Steven Mnuchin told CNBC that the market correction was “a short-term issue” and that within a couple of months “the economy will be stronger than ever.”

“I look back at people who bought stocks after the crash in 1987, people who bought stocks after the financial crisis. For long-term investors, this will be a great investment opportunity,” Secretary Mnuchin said. 

But, is now really a good time to invest? Or, is it better to shelter your shekels until the storm blows over? The financial strategy you pursue depends on your individual situation. Here are six strategies to consider: 

Strategy 1: Buy now

Certified financial planner Chad Chubb, CFP, CSLP, founder of WealthKeel LLC, Philadelphia, PA, specializes in financial planning for doctors of the GenX and GenY generations. “Our specialty is working with physicians under the age of 50, so for their longer-term investment accounts, we see this an excellent buying opportunity,” he told MDLinx.

The reasoning behind this strategy? Some stocks are at the lowest prices they’ve been in years, thanks to the current market drop. If there’s a stock you’ve had your eye on, but it’s been overpriced because of the long-running bull market, now might be a time to buy it at a reasonable, or even discount, price. 

Strategy 2: Choose wisely

Yes, for some, now may be the time to buy. But “bear” this in mind: Although some big-name stocks, like Apple and Microsoft, may have dropped in value, they’re still not at rock-bottom prices. 

Apple (AAPL), for example, is down more than 20% since February. But that’s about the same price it was only a few months ago, in October 2019. So, buying Apple stock now would not be like buying Apple stock in 1987. 

Then again, if you think that buying Apple stock at a 20% discount is a good deal, then go for it.

Strategy 3: Jump on a speeding train

If you have a little money to play with (definitely not your retirement savings or your kid’s college fund), you might consider rolling the dice on a “corona-centric” investment. Many of these companies have been booming while the rest of the market has taken a nosedive. Here are a few examples:

• Clorox (CLX). Every household, business, and clinic needs disinfectant wipes more than ever, and Clorox is the go-to brand. Its stock jumped 33% since November, from about $149 per share at Thanksgiving to nearly $200 per share on St. Patrick’s Day. 

• Netflix (NFLX). With everyone quarantining in place, they need something to do. Hello, Netflix! The home of binge TV rose more than 30% from the beginning of November 2019 to the beginning of March 2020. 

• Zoom Video Communications (ZM). The business of America is business, as Calvin Coolidge famously said. But with everyone working from home, how will business get done? Enter Zoom, an online video-conferencing service that allows companies to move their meetings from boardroom to broadband. Its stock price has nearly doubled in the past few months, from $70 on November 1 to $130 as of this writing. 

Then again, these investments may be nearing their peak, or at peak already. (Netflix, for instance, has been trending down since before Black Thursday.) So, if you’re looking to jump on this runaway train, you might consider what “corona-centric” needs people will have in the next few weeks, and invest in those now. 

(Wait, what about Purell hand sanitizer? Sorry, its manufacturer GoJo Industries is a family-owned company, so it’s not traded on the stock market.)

Strategy 4: Weather the storm

This strategy is the opposite of the previous one. As the previous strategy indicates, the market is extremely volatile right now. But, in a volatile market, the smart money stays the course. 

“After such a sharp stock market decline, investors are right to be wary of any rebounds and rallies. It will take time to establish a bottom and launch a new stock market uptrend,” wrote Matthew Galgani on Investor’s Business Daily. “In the meantime, avoid the temptation to jump back in too early. At times like these, you want to protect your portfolio and wait for a follow-through day to start getting back into the stock market—gradually.”

Despite the chaos in the market right now, resist the urge to just “do something,” warned Sue Stevens, CPA/PFS, CFP, CFA, CAP, of Buckingham Strategic Wealth, Chicago, IL.

“Every inch of you may want to spring into action to take defensive measures as you are bombarded with constant media reports on just how bad it is,” Stevens wrote. “So as frustrating as it may be to just hold steady and not react, for most people that’s going to be the best answer.”

Strategy 5: Refinance your mortgage or student loan debt

In an effort to stimulate and stabilize the floundering US economy, the Federal Reserve dropped the interest rate to nearly 0%. While this move didn’t make quite the impact that the Fed intended, mortgage interest rates and other loan rates did hit historic lows. 

In short, now could be a great time to get or refinance a loan. 

Chubb of WealthKeel said, “Rates ticked up a bit on us [last] week when compared to [the prior] week; however, we would suggest taking a look at both your current mortgage rate and also any private student loan rates to see if you can lower your interest rate.”

Strategy 6: Have your umbrella handy

Did you remember to save for a rainy day? That day may almost be here, so you’d better have your umbrella ready. 

“These times should serve as a good reminder why everyone should have an emergency fund,” Chubb said. 

Call it an emergency fund, a rainy day fund, or a nest egg—whatever you call it, you might soon be called upon to tap into it. How much should you have set aside? A good rule of thumb is 3 to 6 months’ worth of your household income, Chubb suggested. 

It doesn’t have to be all in cash, he added. While you certainly want some of it in cash, you can put the remainder in a lower risk, but highly accessible, investment portfolio.

Although it’s the last strategy on this list, it’s foremost in importance. So, before you try any of the steps above, be sure you have your emergency fund in place first.