So with the likelihood that we will see some kind of corona virus outbreak in the U.S. and further likelihood that folks will overreact to the news—then what?
From my own experience I can say 1st off don’t willy nilly sell your portfolio–there are folks that sold at the lows in 2009 that have still not reentered the markets–instead opting to bury their cash in the back yard in a mayonnaise jar. Do your upfront work NOW.
2ndly–have some available cash. I have 2 eTrade accounts and they are 90% invested. The FIDO account is around 50% cash—all in all I have 30% cash. If we were to get the giant plunge I would begin to plan to buy CEF preferreds–assuming they took massive tumbles as well. If we truly got the huge plunge it takes months and months for shares to recover – these things don’t happen overnight – if I remember the 2009 plunge it took a year to recoup share prices.
I remember in 2009 there were some solid insurance company investment grade preferreds that traded down in the $7/share area–I only wished I had the courage to buy lots of them instead of a taste–when plunges happen you are scared shitles-, you think the world is going to end and all you can think about is ‘let me out’. Resist the urge.
How do we know the bottom is in? We won’t know–no bells rung at the top–nor at the bottom. If a Gabelli CEF preferred with a 5% coupon is selling at $12.50/share would I be happy with a 10% current yield? Hell yes!! I would buy a part position and wait before committing more to the position.
So–get prepared. No time for panic, just rational behavior – have some cash – now!! We don’t know what the market close will bring today–let alone what happens next week.