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Checksies

Money things to read, money things to do.

16 April 2020

Hello! It's been a long time. This is Checksies, a newsletter about doing money things better. If you were forwarded this by a kind friend, you can sign up here.
 

Reminder: disclaimers

Yeahh, we’re starting with some small print. We’re not independent financial advisors, so this is not financial or investment advice. Before spending money on financial products, you should talk to an Independent Financial Advisor. The ones you want are qualified as “Chartered Financial Planners”, and you can find one here. We’re in the UK, which means we don’t understand anything about advice, money or tax in other countries. We have biases. We hold shares in whatever Vanguard thinks is appropriate. We may also hold shares in individual companies, like our employers or organisations we find interesting. We’re trying to work out what’s best to do, just like you are. Stay safe everyone.
 

What would you like us to write about?

Do you want us to talk about our biggest investing mistakes or investing for kids or insurance or… what? Send an idea or a question to @checksies on the Twitter, or hello@checksies.com on the email.
 

Don’t freak out about coronavirus

The coronavirus is hammering stock markets. We know that it’s very hard to see your ISA or SIPP drop in value, we feel that pain too. But we’re not selling, and you shouldn’t either. The best plan for most investors is to keep going with your plan. Here’s how we see it:
  1. Check your emergency fund and top it up if you need to. 
  2. Do not look at your portfolio if it will make you feel panicky. 
  3. Do not sell.
  4. Remember that you have a plan, and stick to it.
  5. Adjust the plan if you need to. 
What do those mean?
 

1 - Check your emergency fund and top it up if you need to. 

If your emergency fund is smaller than “living off it for 3-6 months” size, then consider temporarily stopping contributions to your SIPP and ISA and try build it up a bit. We know, stopping contributions to your retirement fund?! Yes, because having an emergency fund is important - they’re for a rainy day, and these days are looking rainy. It should be kept in an instant-access saving account. Once you’ve topped it up, resume contributions to your SIPP and ISA. We say: look after yourselves with an emergency fund held in cash. 
 

2 - Do not look at your portfolio if it will make you feel panicky. 

If your portfolio dropped in value a lot and that is making you feel terrible, remind yourself that the stock market does drop a fair bit every few years - this volatility is the price of the longer-term gains. We say: just avoid looking at your portfolio, you’ll feel better. 
 

3 - Do not sell.

If you sell the stocks and funds your retirement funds are invested in, you might avoid further price drops. But no-one can predict the short term moves of the stock market, so equally you might also avoid the days that prices go up. If you stay invested and continue contributing regularly, you’ll get the days when the market goes up. And you haven’t lost anything until you sell: you bought a share or a bond, and the value of that has changed theoretically, but the loss isn’t locked in until you’ve sold the share at a lower price than you bought it at. We say: don’t sell. 
 

4 - Remember that you have a plan, and stick to it. 

If you stay invested and continue contributing regularly, in the long term you’ll get the growth you want, and reach the goal you want. The contributions you make when the stock markets are “down” (like: these days) mean you’re investing at a lower cost, which means more opportunity for growth in the long term. The world will eventually get over the coronavirus, and then we’ll need to get back to planning for our older age etc. We say: so stick to your plan - invest regularly and be patient.
 

5 - Adjust the plan if you need to. 

If you’re still feeling panicky, listen to the panic. Maybe it’s a sign that you need a larger percentage of your assets in less risky assets, like government bonds or even cash. (Government bonds are usually considered safe assets because their repayment is all-but-guaranteed, the downside is that their growth prospects are usually smaller than stocks.)

An example: if your assets are invested in the Vanguard Lifestrategy 100 fund, it contains 100% in stocks and 0% in bonds. So if you want to adjust your plan, you might leave the Lifestrategy 100 where it is and switch some or all of your future contributions to Lifestrategy 40, which is 40% stocks and 60% bonds. Over time you’ll end up with a kind of “Lifestrategy 70ish”.

OK, that’s our 5 point investing-in-the-time-of-virus plan. Always talk to an independent financial advisor if you’re in any doubt - they can discuss your actual situation with you, and are qualified to provide Financial Advice.
 
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Some previous Checksies, a recap

All of these were written before the coronavirus, so they won’t mention some recent government programmes (eg the emergency support programmes, mortgage holidays).


What would you like us to write about?

Do you want us to talk about our biggest investing mistakes or investing for kids or insurance or… what? Send an idea or a question to @checksies on the Twitter, or hello@checksies.com on the email.
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