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Investing In A Pandemic - FAQs with Bill Bell Thumbnail

Investing In A Pandemic - FAQs with Bill Bell

There is an abundance of information out there, we know. But you may be wondering what your financial advisor is thinking about things – given that he is looking after your money and all.  So, here’s a quick session with Bill Bell who answers just one question – “What are people asking you and what are the answers?”

Q:  The most popular question by far (about 100% of people I talk to) is: “How are you doing?”  

A:  “I’m doing very well, thank you.  The family is all good (although we do worry a little about our youngest daughter Alexis who is a Lab Tech at Soldier’s Memorial Hospital in Orillia).  And everyone at the office is doing well also, with most of us working from home.”

It’s remarkable how much concern we have for each other, how much we truly care for one another.  It’s something that’s always there, but it’s times like this when we are pushed into a challenging situation all together (but apart) that it rises to the surface and can no longer be contained.  I have said many times since this all started that this is a strangely rewarding time to be an advisor.  It really is.  

Q: “What’s your take on all of this?”  

A: Some form of this vague question comes up, again, in almost 100% of my conversations.  Basically, we all want to make sense of something that seems to make no sense at all.  We have a hard time articulating more precise questions because there are no past experiences to guide us with what to ask.  Thus, I find myself grappling to figure out what is really at the core of this question.  And in the absence of further context I will try to keep my answer short: 

“Interesting times,” perhaps.  

Q: “What’s going to happen to the stock market?”

A:  Ok, here’s a question that’s very specific and obviously a question that you should ask your financial advisor as opposed to the guy next door, or literally anyone else.  And here’s the answer.  

“In the short term, I have no idea.  In the long term, it’s going up.”  

Anyone who gets a different answer to that question from their advisor should be looking for another advisor.  But of course, this isn’t a very satisfying answer and it inevitably leads to more questions – as follows:

Q: “How long do you think it will take before the markets recover?”  

A:  What I like about this question is that it presumes that markets will recover. It’s a given. They just want to know when.  There is a lot of pontification right now about the “shape” of the recovery.  U or V or W or the dreaded L?  Once again, no consideration is given to an endless drop.  Recovery is assumed.  Unfortunately, my answer is still unsatisfying: 

“I don’t know.  In fact, no-one knows.”  

Q: “If it takes too long, I don’t think I have enough time to wait this out.  After all I’m ___________.”

A:  Yes, I can see, this isn’t actually a question, but it begs an answer nonetheless.  And the blank here can be filled in in countless ways – retired, near retirement, thinking about retirement, getting old, raising a family, etc.  My response (to my clients at least) is this: 

“We knew about that before we put your investments in place.  We also knew that there would be significant downturns in the markets and thus in your investments.  This was expected, planned for in fact.  You have simply lost some perspective on your time horizon and that’s natural.  If you were planning on spending 100% of these funds in the next few years then that money is in cash or near cash.  That’s why RESPs for a child already in university or funds earmarked for a renovation or a new home shouldn’t be in the market (and likely aren’t).  The money you intend to use as income has a much longer time horizon associated with it – your lifespan, and probably beyond.  You have time.”

Q: “Is this worse or going to be worse than the Financial Crisis of 2008?”

A: The smarty pants answer to that question would be “Yes, people are dying this time.”  But that’s not (usually) what I say.  Again, this question takes many forms.  “Is this like the Spanish Flu pandemic of 1918?”  Or perhaps, “Is this like the crash of 1987?”  Or, “Is this going to be like the great depression?”  Again, our brains are hardwired to look for comparisons so that we can understand how this is going to play out and prepare accordingly.  You will continue to see countless stories that do these comparisons and they are all in a word, useless.  This is different.  They are ALL different.  Ideally we have learned something from all previous crisis, and can apply that to our benefit.  But that’s not always going to be the case and it’s impossible to assume that we know what’s going to happen next because we have seen this before and know how to fix it.  I know this sounds dire, so here’s what I actually (again usually) say: 

“All previous market downturns have some very similar characteristics.  We were caught by surprise.  At some point, the situation looked hopeless.  Then it got worse.  And eventually it ended.  This is a tug of war between a virus that can’t be seen without a microscope and the entire human population.  I’m betting on us.  I don’t understand the fight or know how it will end, but I am confident that it will.  How long it takes matters considerably less.  I can tell you how it’s different than every other crisis before this, but that doesn’t matter either.”  

Q:  “Why don’t I just move my stocks to cash, wait for things to bottom out or volatility to settle down and then re-buy?”  

A:  First of all, I almost never get this question.  But I suspect that almost everyone is thinking it.  Heck, I’m thinking it!  This is logical and oh so tempting.  Being on the sidelines watching everyone lose money while yours is safely tucked away earning a little (very little) interest is a seductively attractive idea.  But the flaws in the plan have already perfectly played out in just a few weeks.  As the market was heading towards its current bottom on March 23rd, a number of people with money to add made deposits and then waited for the right opportunity which was some combination of peak panic and more stable markets.  Then the market started going up – quickly.  Last week, despite the news growing increasingly pessimistic, the stock markets had one of their strongest weeks in history.  It’s remarkable how quickly we can move from wanting out, perhaps getting out, and then wishing we had stayed in or added to the pot.  Fear and greed.  They trade places surprisingly fast.  Here’s my answer: 

“That doesn’t work.  Almost everything about that idea requires us to have knowledge we will not have – until it’s too late.”  

Q:  “Isn’t there something I should do?”

A:  A very common question and for good reason.  A very high percentage of us are driven to act on problems.  We are not comfortable with the do-nothing strategy because it grinds against our very nature.  To those I give the following response:  

“No, unless you want to add money to your investments to take advantage of the fact that stocks are on sale (see next question).  But that doesn’t mean that nothing is being done.  The portfolio managers in your various accounts are busy adjusting their portfolios, rebalancing, and putting cash to work.  You hired people to do a job (including me), and that work is being done.”  

Q:  “I want to add money to take advantage of this opportunity.  When should I put it in the market?”

A:  This appears to be the opposite of the “move to cash and wait it out” strategy, but it is very sneakily the same question.  It’s market timing and that is, well, impossible.  (Sure, you might get lucky, but we are trying to ratchet out luck as a factor).  The answer then is this: 


Ok, that’s too brief and is always followed by awkward silence.  So, I continue with: 

“One of my clients put it perfectly (thanks Vas) when he commented that “we aren’t trying to minimize losses, there won’t be losses in the end, we are trying to maximize our gains.  Let’s settle for whatever we get rather than miss out altogether.”  And there you have it.  I suggest not putting it all to work at one time to avoid buyer’s remorse if the markets take another nasty tumble, which seems quite possible.  Let’s stage it in over the next 6 weeks in three equal chunks.  If the markets go up, you will be happy.   If the markets go down, you will be buying even lower and possibly be happy about that.  In the end, this (and a host of other issues at this time) is partly about managing your emotions.”

Q: “When do you think they will find a vaccine?”

A:  My answer here is quick and brief:

“I’m not a scientist and I couldn’t possibly know.  I’m sure that the scientists working on it don’t know either.”  

That doesn’t mean that the conversation ends there.  We all suspect that the only real “ending” for this crisis is a vaccine.  That may be true.  A common theme to my answers is that everything we really crave to know and understand is unknowable.  Long term success as an investor means constantly accepting that simple, but very hard to accept reality.  Maybe it’s my undying optimism, or my confidence in the people of the world we live in that makes it a little easier for me.  What I want my clients to take away from our conversations is that I’m much more worried about my daughter working in a hospital than I am worried about markets recovering.  If it’s helpful to pass your worries about your investments to me, please do so.