Last year, I proudly announced that I had made a 20.3% return on my portfolio.
The stock market has been going up, relentlessly, since the financial crisis of 2008 to a gain of over 100% for the S&P 500
Of course, we all have been told that the market doesn’t always go up, that it goes down from time to time. Sometimes, it goes down hard and for prolonged amounts of time, but we rather not believe it and we hope for the best.
Well, my 2019 did great, but 2020 is doing horrible.
As I have shared before, my portfolio is divided into three parts:
1/3 Canada- 1/3 U.S.
- 1/3 International
There are many ways we can choose those allocations.
The way I do it is with these different ETFs:
- Canada: (VCN) Vanguard FTSE Canada All Cap Index ETF
- US: (VFV)Vanguard S&P 500 Index ETF
- International: (VIU) Vanguard FTSE Developed All Cap ex North Amer Idx ETF
So here are my results for the year 2020.
| Market | Change |
|---|---|
| Canada | -6.2 |
| The U.S. | -7.4 |
| International | -9.7 |
Average loss: -7.76
How to proceed in this situation?
In a few previous articles, we have pointed out that in the long run (10 years or more) the stock market average is between 6% to 8%. This doesn’t mean that every year the stock market is going to go up 6% to 8%. This means that there will be good years, there will be bad years, and at the end of the day, over a 10 year time period, the average will be 6% to 8%.
If we look at last year’s spectacular returns of 20.3%, we are still within a positive range: 20.3% minus 7.76%, which leaves us with a positive return of 12.53% for the last 14 months. This is a respectable return. There is nothing to worry about, It’s part of the regular ups and downs of the market.
Plant of action #1
Do nothing. I have been advocating the idea of buying and holding forever. You should buy and only sell when you need your money for retirement purposes or for other live events. Events like the coronavirus should be completely ignored. Every stock market will have a random reason to go up and to go down. There is nothing to be done about it. It’s part of the system. The stock market has higher returns only because it has higher volatility. Just take some yoga classes, practice some mindfulness, write on your gratitude journal, and don’t watch the news.
Plant of action #2
Buy some more. We are not fortune tellers or market timers. We are buy-and-holders. But let’s face it. If you see some items at the supermarket at a deep discount, we tend to buy it. Well, why don’t we act the same when it comes to the stock market? The same stocks that were at higher prices only one week ago are now at a considerable discount.
I don’t have a lot of spare cash to invest, but I do have a rule that I try to follow (if my nerves allow me to). Whenever I see anyone of my three investments going down for more than 20%, I buy some more of it.
I don’t recommend this strategy too much, because it keeps you glued to the news, it occupy too much space in your mind when you could be thinking of more productive or fun things to do, because it could become a trigger for more market timing, and because in the grand scheme of things, it really doesn’t mean that much when you are planning to hold your portfolio for more than 10 years. But, if you were going to have any kind of reaction, the reaction should be to buy more.
How are you reacting to the coronavirus?
Please let me know in the comments section or send me a message through any of my social media channels.
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