The Financial Independence – or FIRE – community has really mostly come about since the 2008 global financial crisis. Which means the bear market caused by coronavirus is the first real test of everyone’s investing nerve. In theory, everyone knows a bear market means “shares are on sale” and not to sell up. Who among us can quite literally put our money where our mouth is?
I can tell you that our KiwiSaver accounts and Sharesies portfolio have taken quite a hit. I won’t tell you by how much because I want to save that for the next net worth update and I wouldn’t be surprised if they’ve fallen a little further by then. We’re still contributing. This is dollar cost averaging in action, folks!
And of course because coronavirus loves to kick a man while he’s down, I’m 99.9999% certain we’ll not be taking our holiday to Hong Kong and the Philippines in May. Hopefully we’ll be able to get some kind of credit we can use to re-book later. Otherwise it’ll just be money down the drain. But hey! I’m not going to mourn spent money. We’ll keep putting aside the same amount of money towards holidays that we’ve always budgeted for, so re-booking won’t change the amount of money we have available to invest. It’ll just delay our future holiday plans as we rebuild this one first.
The good news is that there’s hope for financial literacy in this country. On the posts of one or two Facebook friends I’ve seen talking about KiwiSaver, there were a surprising number of people giving the good advice to not bail out and switch to a conservative fund if your time horizon is long. Somehow, word is getting out. And that’s a good thing!
But of course the biggest question for us here in New Zealand is: How long will this last?!?!?! There are two potential outcomes here:
- The virus spreads in NZ as it has in other countries and we spend 6-18 months waiting for it to run its course.
- We avoid widespread community outbreak thanks to the swift action of the government and get back to “normal” life fairly quickly, though effectively cut off from the rest of the world lest the virus find a way back into the country.
Regardless of which scenario happens, the economy is down the toilet for a couple of years at least. Even if NZ avoids a huge outbreak and is able to go back to regular social contact fairly quickly, the parts of our economy that are dependent on the overseas visitors still barred from entering the country will ensure that unemployment stays high for some time. The best us investors can hope for is that we have the cashflow to be able to take advantage of discount markets while they’re available.
How has the current economic climate affected your investing plans? Have you managed to hold the course?
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