How We Continue to Invest During Uncertainty

Finances During Times of Uncertainty

Non-essential businesses have been ordered to close across the country. Students are all taking classes online, most restaurants are closed and the few that are open, are for takeout and delivery only.

Millions of people have filed for unemployment. Those who work in the travel and hospitality industry are being laid off or furloughed. Barbers, manicurists, actors, waitresses, housekeepers, bakers, and so many others are without work right now. The uncertainty during this time is intense.

It’s a scary and volatile time in our world.

The financial pundits say that this time is different because this financial crisis is not due to financial mismanagement but due to a pandemic. Others will balk at that sentiment. Time will tell if this market downturn is different from the 2008 Great Recession, Dotcom Bust of the early 2000s, or Black Monday in 1987. 

I am writing this blog post from my dining table and new makeshift office. I’ve been hesitant to write anything or create content during this time because I just didn’t know what to say. I’ve helped four family members navigate the unemployment system, I’ve written to the U.S. Embassy because my father is stuck in Ecuador and I’ve become the primary caretaker for my grandmother since March 21st.

What a year this month has been! ?

What I’ve realized is that during 2008 I had accepted a job that was nearly double my salary from the year before. Yet because I had zero investing knowledge, I missed out on some incredible buying opportunities when it comes to stocks. If I knew then, what I know now I could have begun increasing my net worth then instead of waiting until 2016.

Covid-19 Effects on Our Income

My last full day in the office was on Friday, March 13th. It’s been over a month and I am still working from home. I’m fortunate. My husband is considered an essential employee and has continued to report to work although his work schedule has changed.

My husband and I are incredibly lucky to still have our normal paychecks. In fact, because my husband is working during this time, he is receiving hazard pay from now through May from his employer. Mr. Miller was given the option to take an unpaid leave of absence, but he continues to work… at least for now.

Despite the uncertainty in the world, we’ve continued to invest during this time. 

Effects on the Markets

On February 12, 2020, the Dow Jones closed at an all-time high. Since then, the market fluctuations have been a rollercoaster ride. Some ups but mostly downs from the record highs in February. 

Comparing Dow Jones 2020 high to lows to date

I’ll admit, when the market began to plunge, I wanted to buy more stocks. I wanted to deviate from our financial plan and buy, buy, buy.

Since we use a zero-based budget method to manage our household expenses we don’t have cash laying around. We have a travel savings account, an emergency fund, and an account where we save for a future rental property. Our travel savings account had just $1,000. However, our emergency fund had enough cash to cover 6 to 7 months of expenses. Jackpot!

Reminder: Don’t touch your emergency fund.

I was tempted to use money from our emergency fund and invest it in the stock market. The big market drops in early March tempted me to forget our financial plan. Basically, I almost lost my mind. What’s interesting is that the decrease in our investment portfolio didn’t make me panic. What gave me pause was the amount in our emergency fund. With so many people losing their jobs and businesses struggling to stay afloat, my concern was about whether six months was enough. (Note to self: Increase emergency fund by 3 months.)

Investing during a Bear Market

After a reality check that nothing is guaranteed including our income, I left the emergency fund alone. Instead, I withdrew $7,000 from a separate savings account designated for real estate investing. With that $7k withdrawal, we maxed out one of our Roth IRAs, purchased index funds in the brokerage account, and…wait for it… invested in individual stocks.

Because the market has dropped over 20% since its record highs, we are officially in a bear market. Some stock prices have dropped to 2018 prices. It’s time to buy. It’s time to invest.

My investment philosophy is to “set it and forget it.” Contributing to our retirement investment accounts like the 401K and IRAs and invest those contributions into low-cost index funds. We dollar-cost average into the market. However, with stock prices plunging we are willing to add additional money into investments. 

Mr. Miller and I also make contributions to normal brokerage accounts for regular investments. I prefer to invest in index funds. My husband likes to pick stocks and invests in individual companies. However, this time, I added a few individual companies to my portfolio as well.

We use an online savings account so it can take a day or two for the money to transfer from our savings to our checking account.  Despite that, I imagined that the days following would likely now see a significant price jump and it could still be a buying opportunity in the days to come.

Therefore, I logged into my brokerage accounts and began setting up limit orders.

Try Limit Orders to Buy Stocks

Stock prices rise and fall over the months and years. They are up or green days and they are down or red days. You might have noticed that even in a single day the stock price of a company or ETF will fluctuate. There are many types of investment orders around.

Rather than watching stock prices all day, I like to place limit orders. Investopedia defines limit orders as, “a type of order to purchase or sell a security at a specified price or better. A buy limit order can only be executed at the limit price or lower, and a sell limit order can only be executed at the limit price or higher.”

I have joked about whether I’m frugal or just cheap. That’s not to say that I overlook quality. I like to get the best price possible, no matter what I am buying. Whether it’s a hotel room, sneakers, airline ticket, or electronics. But I especially like to save when I’m buying stocks. The best stocks to buy are those that are undervalued and underpriced.  I am not a day trade. I prefer to buy and hold my investments. The cheaper I can buy a stock the more upside I enjoy when the stock price starts to move in my favor.

A few of the stocks I put on my watch list during this time were Southwest Airlines, Darden Restaurants, Inc., Carnival Cruise Lines, and Berkshire Hathaway. One limit order that I set was for Darden Restaurants (NYSE: DRI.)

Investing Strategy Photo

Limit Order in Action

Olive Garden, Seasons 52, LongHorn Steakhouse, and Yard House are some of the brands in the Darden Restaurant group. All restaurants have been affected by COVID-19 and that includes Darden Restaurants.

Some restaurants have closed during this time and others have slowly made the pivot to take out and delivery only. The DRI stock was trading at over $120 in February 2020 and had not closed at less than $50 in over 5 years. When I learned that the DRI stock price had plunged to less than $80 it was time for me to plan my investment strategy.

I logged into my brokerage account and made set my limit order price to $25. Now, this number may seem incredibly low, but if I am going to buy individual stocks, I want to buy at the lowest price possible for companies that I think are undervalued. If DRI traded at $25 or below, my order would execute, and I would lock in the stocks at that price.

DRI began trading lower and lower every day. It even reached a low price of $26.15 on March 18, 2020. However, since it never reached my $25 threshold, the order was not placed. Since its low price on the 18th, the stock price has increased to over $70 per share. Perhaps, I missed my opportunity by $1.15. Ouch!

That was an example of how setting a limit order didn’t work on too well for me but I’ve also placed a few other limit orders during this time and have been able to purchase stocks and ETFs at prices that we haven’t seen in five-plus years. NYSE: VTI is the Vanguard Total Stock Market ETF, I set a limit order price for a $110, and on March 23, 2020, that order was placed. We haven’t seen VTI down to that stock price since the fall of 2018. Click here to see VTI price history

We took a chance by moving money from a high-yield savings account to the stock market. After all, this money was meant to purchase real estate. But in the end, we are happy with the decision to have this money work for us now and slowly rebuild our investment property savings fund.

Check out this video by Arvabelle who does a great job of explaining the different options for stock orders. Have the stock market drops impacted your investing strategies? Have you made any changes to your savings or investing plans?

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  1. Okila James | 23rd Apr 20

    Great content. I bought 3 Berkshire Hathaway stocks when it was dipping, I will hold it for the long run. Also, I am buying pennies stocks to make a profit. Wish you and your family all the best. You got a new follower.

    • Mrs Miller | 23rd Apr 20

      Thanks for reading! I prefer passive investing but an educated stock pick is fun. Stay safe.

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