Financial Independence Portfolio Update #4: The Covid-19 Bear Market of 2020

March 13th 2020

  • Target: $1,100,000
  • Current Balance: $610,000
  • Remaining: $490,000
  • Portfolio Appreciation Since November 15th 2019 (4 months): $162,000 $6,000

It is mid-March 2020 and we’ve dipped into a bear market (20% drop from peak).

Don’t Panic.

I’ve peeled back three months of gains and the investing portfolio has effectively rolled back to November of 2019.

Don’t Panic.

Covid-19 is has not been contained yet and the United States is woefully unprepared to handle this pandemic.

Don’t Panic.

This is a difficult post because, near term, there is little good news to convey. The market hasn’t bottomed yet and we are staring a full blown recession in the face. My previous strategy of buying into weakness as well as my cash reserves were only viable for market corrections. My strategy was informed by the correction of 2019 and I did not expect that a full blown bear market would be right around the corner. That said, I do have some cash to re-deploy and because of the looming economic impact of this pandemic, I’ve started looking at previous recessions to see if I can glean any insight and adjust my investing strategy accordingly.

First a few points to note

  • As of today, we are 21% from the peak but we have gone as low as 27%
  • The start of the current bear market was February 20th 2020 so we are just one month in.
  • The Great Recession of 2007 saw a max pull back of 57% and it took ~15 months to bottom and a whopping 50 months or four years to recover.Great Recession of 2007 (1)
  • The recession of 2007 as well as every other bear market in history has ended with all time market highs. 

I need to sit with some Python programming and historical data to try to cut the best past through this. Next month’s update should be a fun one. In the mean time, rational minds will prevail. I will not be panic selling and I will continue to dollar cost average into the market as well as continue to slowly deploy my cash reserves.

 

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