My Investing Strategy In A Market Downturn


Recommended Readings:

Two Disclaimers: 

  1. I’m not a financial adviser, just a young guy who likes reading about personal finance and sharing ideas and strategies with others. Choosing a strategy that aligns with your values and risk tolerance is key. 
  2. There are plenty of other thoughts on the COVID 19 virus. I found this article, this Joe Rogan podcast, and this Tim Ferriss podcast to all be useful resources. This article will not be touching on that specific topic, though I am following the protocols mentioned in those resources.

With that out of the way, here is the strategy:

  1. Keep physical, mental, and spiritual health as a #1 priority. 
  2. Have 6 months of living expenses saved, in cash. 
  3. Spend less than you earn – invest the difference and avoid debt.
  4. Avoid advisory fees by investing your difference in low cost index funds (I use Vanguard’s Total Stock Market Index – VTSAX).
  5. Reduce your expenses enough so you can invest 50% or MORE of your income.

More on each point….

On point #1: eat whole foods, mostly plants, not too much. Exercise at home through body weight resistance training, go for walks or runs in the fresh air. Call friends and family regularly with your new-found sheltered time. Try meditating. Order a copy of THE PATH and use the time to go through the writing exercises. Above all, be prepared.

On point #2: depending on who you ask, 6 months might be too much or too little of an emergency fund. For my risk tolerance it is enough for me to feel comfortable following an aggressive investing strategy where I do not want to tap into my investments.

On point #3: one of my close friends introduced me to Mr. Money Mustache a year into my career. I started with his first blog post and slowly worked my way through his articles dating back from 2011. This is a good place to start if you are unsure on how to reduce your expenses. Two other useful places to start would be: tracking your expenses for one month, and focusing on the big 3 (housing, transportation, food).

On point #4: the stock series I recommended above will deliver everything you need to know about Vanguard VTSAX. I like it because the expense ratio is .04% and it gives you a slice of the entire market (which always goes up). With the fluctuations in the market over the past few days I have been shoveling any excess cash into this fund. 

On point # 5: all five of these points are the exact same strategy I follow in a bull market. The only difference is the aggressiveness of how much I will try to exceed the 50% benchmark. I am treating VTSAX like a canned good that is going on sale. I don’t believe it will ever go bad, so it is time to stock up. It will serve you in the future.

That’s my strategy, what is yours? 

investment by Gilbert Bages from the Noun Project


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