A stock I bought as recently as mid-February 2020 is down 60% from my original purchase price. I bought more of the stock after it fell 20% from my first purchase, more after it fell 20% from the second purchase, and more after it fell 40% from the third purchase. My total investment in the stock is around 3% of overall stock portfolio, and it is down 55% from the total invested amount.
My total equity investment – stocks and funds – is down around 25% in the last one month.
My total financial net worth is down 15%.
So, what saved the day for me as far as my total financial net worth is concerned? Cash in hand, that I started building up from the end of 2019, in search for investment opportunities that were not to be found anywhere. Plus some income that came in over the past few weeks.
“Life,” John Lennon said, “is what happens to you while you are busy making other plans.”
Investing is not any different. While we were all pinning hopes on an economic recovery to justify high valuations of our stocks, as no crisis was visible on the horizon, we were handed a crisis of unfathomable proportions.
Anyways, the reason I am writing today’s post is because a few readers and a lot of my friends have asked me how I am investing my own money through this crisis brought about by the COVID-19 epidemic and economic recession fears.
“Nothing much has changed,” is my usual response.
While what we are seeing now feels like a combination of the past few deep crises the world has been through, your investing process must be designed in such a manner that takes into account the worst of times anyways.
So, here is how my broader financial planning and actions look like as I wade my way through this crisis –
1. I have always had around eight months of my monthly household expenditure saved as emergency fund, which I have raised to 12 months now. Almost 20% of these funds stay as cash in hand, and the remaining are in couple of liquid funds. I don’t use or plan to use these funds for any purpose, including investing in stocks, however enticing the opportunities may seem. These funds are only for family emergencies, and thus sacrosanct.
2. I have term insurance of Rs 1.5 crore for myself. My medical insurance covers me and my family for Rs 20 lac. I haven’t changed any of this, nor do I plan to for some years.
3. As far as my family’s total financial investments are concerned, approx. 80% is invested across 18 stocks, 10% in three equity fund schemes, 5% in two liquid fund schemes (apart from the emergency fund), and 5% in PPF. I don’t keep much cash in hand, and anything extra in my bank account is shifted to liquid funds. Amidst the ongoing crisis, I have kept some additional cash at home, but that is to take care of necessities, as the idea to go to a bank or ATM isn’t a good one as of now.
4. We also have some gold in bank locker. I don’t count it as an investment anyways, as it doesn’t generate cash flows. But it just lies there, and I don’t wish to do anything about it (don’t ask me why!).
5. I save more than 70% of my monthly income that I keep investing in stocks, month after month. I am doing that now too, and without worrying about what has happened to my existing portfolio over the past few weeks, and what may happen to my new investments over the next few months. A high savings rate is important at all times, and especially during times of high uncertainty. Because you learn to live on less, you are pardoned a few investment mistakes and also stock market downturns. Basically, high savings help you survive such mistakes and bad times, and survival is all you need to ensure for building a long-term track record.
6. Having taken care of emergency funds, insurance, and any significant money I may need over the next 3-5 years, my plan is to invest in stocks for the long term, which is a period beyond 15 years. Nothing much bothers me given this time horizon and that my family’s critical and essential needs are taken care of and will be taken care of if something happens to me.
7. I don’t maintain an online portfolio, but maintain one in excel. So, most of the times, I don’t have more than rough idea of what my stocks and funds are worth in totality. It’s only once in few months, or when I need to calculate stuff to write articles like these, that I bother to update my sheet. I would rather spend my time on my work so that I am able to grow my income and subsequently save and invest a large part of it sensibly, than keep a score of what I am worth at all points in time. Such a round-the-clock score-keeping either leads us to an inflated, or deflated ego. Both are not worth it anyways.
8. As far as the ongoing crisis is concerned, I plan to keep buying stocks where I find bargains and businesses that provide great value at cheap prices. I am not worried if my stock, bought now, falls 50% in the next 1-2 months. That may indeed happen looking at what the world is going through. But I plan to keep investing in a staggered manner, and more if the prices get even cheaper. Again, this is money I will not need in the next five years. Hoping to be a net saver for the next many years, I am always looking for lower stock prices. And the current times provide such opportunities.
I survived the 2008 crash, thanks to high savings, low financial liability (that stands at zero as of now), and a lot of good luck. Living through the current downturn hasn’t been easy, and if the situation remains as it is or gets worse from here on, it would be nothing short of brutal.
I am pinning my hope on cash in these times, and humanity that I believe will be able to tide over this crisis though after tremendous pain.
Money is the last thing I must worry about as people die everywhere. But I will keep investing, without the regrets of what has already happened and worries of what may.
“Life finds a way,” said Dr. Ian Malcolm in the movie Jurassic Park.
Life, I believe, will find a way yet again.
Given that I don’t have any control on what’s happening all around, in the world and in stock market, I must not worry about anything anyways. If I survive this crisis, this time won’t matter. And if I don’t, nothing would anyways.
Life would still go on in its full glory, with or without me.
My dear friend, I wish safety and survival for you too.
P.S. The idea of writing this post came from Ben Carlson’s post.
Sir please increase your health insurance as given inflation of 5 percent 20 years later you will require higher amount. And increasing it will be difficult in future if you get any disease
Thanks for your article and it’s very informative in this tough time.
Have you sold any stocks because of this crisis? I am investing for the last 3 years directly in stocks and you know the situation – even good companies also went down by 50% and more.
Very nice thoughts. Liked your simplicity.
Great Sir.
Clarity to the core.
Am an optimist senior citizen
Best Regards
Superb!! Thanks a lot.
Very well explained. Nice and precise
Sir, assuming you have one PPF account, your Net Allocation in Equities is something around Rs. 24,00000. How are you distributing this money to 18 stocks, in equal or unequal proportion?
By the way this amount increases to 48,00000 rupees, if you have two PPF account (one for your spouse also). Pl advise.
Inspired writing as always. appears you have defeated CORONA with your words
sirji, interesting thoughts of your life process and planning laid down.
“As always planning and then seeing it through as being executed as thought of and the joy of the results following is what one should do”
that what I have tried my best to understand on reading your thoughts.
keep writing and inspiring. let the good work continue sirji,
All the best with humble regards
Any house Loan?
Thanks for sharing your wisdom during these difficult times. I have a doubt regarding the Liquid funds. I have put aside 6 months of my monthly household expenditure towards emergency funds in Liquid funds. But now, even the liquid funds are on the decline from the past few days. Is it safe to have my emergency fund invested in the liquid fund or should I sell those units and put the money in a bank FD. Please advice.
Wow…best article is recent times.. thanks for sharing your personal investments info..
Words of wisdom of life & markets, well said.
Only understand I should have started years ago.
Now on the right path and will finish well with your kind education.
Thank your for providing financial blueprint and a survival guide.
Hi,
Thank you for great content, educational and generous sharing!
Do you also share your investments?
All the best
/Drefus
Sir nice content.
Thank you . Im doing same but i worry sometimes like, is it correct time to put money bacause of PF mostly -ve return. But now i get clarity to just Pass through this event…. Stay safe and keep invest ….
Your this article act as a medicine on my wounds.
Thanks
The PM has just declared a country wide 21 days lockdown. This will definitely effect the economy, but it will be brutal for the poor who live hand to mouth. We are the fortunate ones discussing about investments and savings. I simply wish that our country is able to stop this menace of corona for once and all. Until then stay sane and optimist my fellow tribe members.
Thanks for sharing Vishal !!!
Thank you very much for sharing your views. It will help your fans and all.
With best wishes and regards 😊
Thanks sir
for such a great and useful information.
Well done Vishal,
That’s very honest and upfront of you to share these details.
At a soul-searching unprcedented time like this, one looks for beacons of light, and posts like yours are definitely very high up in that category!
Keep up the great work!
Regards,
Uday.
I am bumping (doubling) up my monthly SIP amount. Be greedy when others are fearful and be fearful when others are greedy so said Warren Buffet
With a large monthly saving rate, no doubt, you have a lot of opportunity to invest.. And I guess you are young enough to recover from these periodic debacles.. Not too shabby.. 🙂
Are all your investments in India or do you also hold stocks/ETFs etc. in North America ? Just curious since I am based in Canada..
Always enjoy your emails, articles etc. Specially the ones about WB and CM..
Regards
Sultan
Great article Sir.
Hi – Would it be possible for you to share an excel sheet format for tracking personal portfolios and stocks – something which could be updated automatically when required?
Full disclosure – I know very little excel
Indeed it is a great article Vishalji. Thank you. I listen your words of wisdom since few years. I am walking in your foot steps. Could you share that two Liquid Funds that you are investing into? I hope nothing wrong in asking for names of MFs as they are not stocks. 🙂
The wisdom of what you wrote last year , shines through the more last year gets put in the past…….. Thank you my friend for sharing these thoughts…….