Coronavirus & the Dow Down 1000+ Points: Time to Panic?

The new coronavirus, dubbed COVID-19, has led to 80,000 infections and over 2600 deaths since originating in Wuhan, China in December 2019. This outbreak which the World Health Organization (“WHO”) has said is a “public health emergency of international concern” is a true human tragedy. Pretty scary at first glance, but taken in context it’s not so different from the normal flu. According to Centers of Disease Control, this season through February 7, more than 19 million people just in the US had caught the flu of which 10,000 died from it.

While the flu is caused by any of several different types and strains of influenza viruses, COVID-19 is caused by one virus, the novel 2019 coronavirus, now called severe acute respiratory syndrome coronavirus 2, or SARS-CoV-2.  When looking at the symptoms of COVID-19, we find that they are similar to that of the influenza (flu) virus, i.e. cough, runny nose, sneezing, sore throat, fever, headache, etc. Symptoms for both COVID-19 and the flu can be mild or severe and can result in pneumonia which can lead to death. According to WHO, the infection has been fatal in 2-4% of cases within Wuhan, but in less than 1% elsewhere. Rates go up for the elderly and those without sophisticated health care providers. Again, pretty similar to the normal flu.

Both COVID-19 and the flu can be spread from person to person through droplets in the air from an infected person sneezing, coughing, or just talking. Neither virus is treatable with antibiotics. Good news is that there has been promising work in the drug and vaccine space against COVID-19 but those need to be tested. Prevention methods for both include frequent, thorough hand washing, staying home when sick and limiting contact with those infected.

It’s still unclear as to how this situation will unfold and how much spreading of COVID-19 will take place. Fortunately, the immediate health risk for the general American public is low at this time. Further, it appears that China is getting the disease under control as the pace of infections (as represented by the “daily tally of new cases”) peaked a few weeks ago and has since steadily declined. However, reports over the weekend showed that the coronavirus is not only just appearing in other countries but unfortunately accelerating in some like Iran, South Korea, and Italy. The Italy news has many worried that Europe could be in the first innings of the ballgame China has been stuck in.

We’ve talked before how the stock market doesn’t like uncertainty and a virus like this only compounds that. We know in China that business has been severely affected. Not only are people avoiding going out to the movies and having fun outside, they’ve been told to stay home to stop further contagion. Most factories have basically been shut down since the Lunar New Year. These Chinese factories help produce many goods needed by world-wide manufacturers. If XYZ Company in Canada can’t get that one particular China-made good that goes into its finished project, it’s stuck in limbo until things clear up. Thus, we basically have a global supply-side shock in the making. Not good for the global economy! And don’t forget that China now accounts for 15% of the whole world GDP. Talk about ripple effect!

The odd thing that happened is that when COVID-19 gained notoriety in January, the US stock market sold off only to quickly recover and just recently was trading at record highs. The market shrugged off the bad news, putting it into the “one-time” event category or figuring that the global central banks would turn more dovish on rates and thus come to the rescue.

But the weekend news about Iran, South Korea, and Italy as well as the warning that an extended Chinese shutdown could cost the world up to $1 trillion in lost output, brought the fear back. Which led to the DOW’s worst trading day in two years, down over 1000 points yesterday!

So is it time to panic? Of course not.

COVID-19 is a terrible disease outbreak. Unfortunately, it’s not the first and it won’t be the last. We’ve seen this happen before; just think of the following: Ebola, Zika, Swine Flu, SARS. Let’s take a look at the market reaction to some of these:

Market reacts during virus outbreaks

The stock market sold off in all of these cases indeed. But more importantly is to see how the market recovered.

market heals after disease outbreak

As you can see, in most cases, the market typically recovers within six months.

We come back to our old saying of: control what you can control and don’t get emotional from the things you cannot.

Moreover, don’t let short-term market events alter your long-term planning. Unfortunately, humans are not wired for disciplined investing and usually trade poorly based on fear. So avoid that mistake by staying invested and staying disciplined and focusing on things that can be controlled:

  • Create an investment plan to fit your needs and risk tolerance
  • Identify an appropriate asset allocation target mix
  • Structure a well-balanced, diversified portfolio
  • Reduce expenses through low turnover and via passive investments where available
  • Minimize taxes by using asset location, tax loss harvesting, etc.
  • Rebalance on a regular basis, taking advantage of market over-reactions by buying at low points of the market cycle and selling at high points
  • Stay Invested

If you’d like to further discuss how disease outbreaks affect your portfolio and/or long-term financial planning, don’t hesitate to contact us.

 

https://dwmgmt.com/

Women in the Workplace

As a female in a modern day workplace, my experiences have been mostly positive, although I am still in shock of things said to me, or how I have been previously treated in professional settings. Since coming to Detterbeck Wealth Management in November I have felt comfortable, respected, like I fit in, but I can’t help but imagine what it was like in the 1960s when women were first entering the workforce. After the feminism movement, and women getting the opportunity to vote, they began to have access to ‘paying work’ in coed environments. At first, they were only allowed to work in poor status or low paid occupations, and earning much less than men doing the same line of work. As the 20th century progressed, the labor market shifted and women moved into longer-term jobs like education, banking and office work that doesn’t require manual labor. And now during the 21st century, labor intensive jobs are populated by both genders! 

Unfortunately, women in the workplace aren’t as equal as some people think. In the finance industry, women make up 15% on the executive level. In 2014, women made up about 33% of the legal profession while men made up 67%, per the American Bar Association. In major technology companies, 70% of the workforce is men, says TheMuse. According to healthline, in 1965, 1 in 10 US medical school students were women, and in 2016 they reported it was up to 51%, as most physicians nowadays are women. But why are these stats important? Because women are pivotal in the workplace! 

One of the biggest advantages women bring to the workplace is communication skills. Women are known to be easier to talk to, listen better, and bounce positive ideas off of coworkers in meetings, therefore boosting brainstorming and morale. Since women usually have more of a nurturing appearance and tone, people are drawn to opening up to them resulting in a comforting bond. This also creates a well-rounded workforce when women use intuition, sensitivity and emotional intelligence to read verbal cues and body language that can help solve problems and make team productivity excel. 

Another advantage of having women in the workplace is that women are recognized to handle their emotions better than men. They can remain calm and keep composure when an unexpected situation makes things tough. Being able to have employees and partners that are not phased when anything goes awry is crucial in maintaining consistency in a workplace. 

Women are also known to be incredible managers from their analytical skills of being detail oriented, which comes in handy for negotiation too, alongside great communication skills. 

Lastly, but certainly not the final reason, women are great in the workplace because of their strong morals and ethics. From the treatment women receive daily, not just in work, women strive to be in environments that are fair and just. Having people on your team that want to do the right thing, and treat people the right way, will reduce unethical business by making appropriate decisions more often. This mindset will have companies taking steps forward constantly, rather than taking avoidable steps back.

As Payscale researched, the gender pay gap difference has shrunk in the last decade, but still remains. In 2019, women made $.79 cents for every dollar men made, and race and job descriptions can still affect that $.79 cents. Women have proven to increase rapport, create positivity in environments and motivate others as they continue to persist themselves. Equal opportunity and perception towards women is essential and can only progress society, the economy, the business world, and is all women want. With the examples above, women create a togetherness in bonds and strong team spirit that no one should miss out on, ever!

https://dwmgmt.com/

A Heart for Splurging: How Budgeting and Expense Tracking can Free Up Your Time & Money

With love in the air on Valentine’s day, endless amounts of consumers will pile into stores, buying up cards, chocolates, or mega-sized teddy bears to share with the ones they love. In fact, on average Valentine’s Day participants will spend $196.31 according to a recent report. With that decent dent coming in each February, Valentine’s Day can help us softly return our eyes to a very important and relevant topic: Budgeting.

I know, that dreaded B-word, and on the most lovey-dovey day of the year! While it may bring a more serious and somber mood associated with the connotations of it, budgeting can and should be viewed in a much lighter and friendly way! Using modern-day technological and analytical methods, we can more easily wrap our arms around what can seem to be an extremely tedious and cumbersome process.

As with so many an established method, modern analysis has found unique and interesting ways to innovate classic solutions. One great example of such innovation is a theory coined as “zero-base budgeting”. In essence, this idea conjectures that all expenses in a set period should be categorized in advance such that each dollar earned should go towards a specific category. For example. If you made $4,000 per month, in a zero-based budget you’d allocate $2,000 for mortgage payments, $500 for food, and let’s say $500 for savings (wouldn’t it be nice if all budgets were this simple?). Now we have each expense labeled out and our income allocated towards them. But wait! We still have $1,000 left unallocated! Instead of leaving this piece out, we need to find a home for this cash to get back to our zero-based goal. So why not allocate this extra funding we found towards a great goal of paying down debt, or if we don’t have any debt, let’s shoot for an emergency fund or perhaps some extra cash for a romantic weekend getaway! Or, let’s say we don’t end up spending all $500 for food at the end of the month. We could roll this forward, or…go out for a nice date night! Using this technique, you’ll have a purpose for each and every dollar, which ensures you put your money to work for you and weeds out those unnecessary expenses that rears its head along the way!

An even simpler and more general rule to work with that incorporates the same principle is the 50/30/20 rule. Essentially, it’s a zero-based budget with your categories capped to three distinct classes: fixed expenses, discretionary spending, and savings/debt payments. Knowing this, our aim with this method is to re-organize and cut down expenses such that each month, your after-tax income is split between the three with the following, intuitive guidelines: 50% of your income goes towards fixed expenses (think insurance or mortgage payments), 30% goes towards discretionary spending (think entertainment or gifting), and 20% is used to pay down debt or build up savings. This last 20% category may be the most important factor to future financial success. By “paying yourself” i.e. saving on a regular basis, you start in motion the power of compounding. Once again, following these guidelines will also give your earnings a direct usage, which builds a baseline for proactive monitoring, instead of looking back and seeing where you overspent or having a non-distinct spending goal. Now you can move through the month and monitor where you are for each category using each method, and be able to adjust your spending accordingly!

Now, I know what you’re thinking: “This is great in theory, but I still have to come home from a long day and tally up all my various receipts, statements, etc. to create this budget, let alone monitor it constantly”! Well, fear not, as this is where the technological advancement pieces become so handy, and make budgeting a breeze! Nowadays, there’s an app for everything, and budgeting is certainly no exception! For example, a small indie firm called Intuit (yeah the same people who make that obscure tax software, what was it called again? NitrousTax?) has a free app for your phone that can help you tackle this project quite a bit. With Intuit Mint, you can create a link to any number of checking or savings accounts, debit or credit cards, or even straight to billing sites! Once all these accounts are linked, transaction data from each will start pouring in, and are automatically categorized for you into several different arenas which fit nicely with the zero-based budgeting plan we discussed! Within the app, you can also set goals for each of these categories and reallocate existing transactions that might have been mislabeled. Now each month, you’ll get a summary of how much you spent in each division, and Mint can also send you a notification when you’re close to exceeding your goal, to keep you right on track. (Additionally this app has some other cool features like credit score sampling and bill pay reminders, all for free!)

Some other apps that work in a similar capacity include EveryDollar, created by the zero-based budget guru Dave Ramsey, which has a free version that performs the same function with a slightly more intuitive user interface, but will require you to manually enter your transactions each month. There are also several others out there on the app market including Monthly Budget Planner & Daily Expense Tracker, BudgetBakers’ Wallet, Spendee, and many others. Each of these have their own unique setup and categorization but accomplish the task of simplifying your budgeting process!

All in all, budgeting is one of the biggest pieces of one’s financial puzzle. Most of the time, our income levels, investment performance, social security or any number of other inputs are not 100% in our control. But one important area, in which we do have total control is our spending, which makes monitoring this area a key to long-term financial success. By using analytical ideologies like zero-based budgeting or software aimed at making the whole process easier to follow-along with, we can take out the stress and time that used to be associated with budgeting, and instead create our own steps to reaching our financial goals whether those are getting out of debt, building long-term wealth, or just buying that rose bouquet for our significant other.

For further advice on budgeting and its ties to our financial planning process, please reach out to us! Happy Valentine’s Day!

https://dwmgmt.com/

The Art of the Notebook

What’s your favorite organizational system? How do you stay up to date with the important items in your life? Maybe you don’t even have a system. We all juggle a lot of information on a day-to-day basis. From time to time, everyone could use a little help on their daily tasks, planning their next big trip, or even ensuring their bills are paid on time. There are numerous ways to approach organizing these elements. The Bullet Journal Method: Track the Past, Order the Present, and Design the Future by Ryder Carroll introduces an inventive way to attack these key issues we all face.

The Bullet Journal Method (BuJo for short) is an ingenious organizational system that many people use as an alternative to a journal, or a traditional planner. The best BuJos feature a symbol format that allows you to easily customize your own page layouts, similar to below. The symbols are the syntax that makes this method so useful. By simplifying tasks, notes, and events into a bullet point format, the BuJo method allows you to focus on only that which is essential. Writing effective bullets is the key to success for a productive and mindful journal. Too much information and your mind may lose sight of the goal. Too little information and your bullet may be ineffective.

In college, one of the most popular ways to retain information is by writing the information out or using flashcards. Like flashcards, the Bullet Journal is solely a handwritten process. It allows you to customize your organizational habits as much or as little as you see fit. Many experts suggest that by writing things down you may improve your memory. Carroll offers that by writing out your day to day life and actively organizing your future, you are creating an archive to look back on and learn from. See what worked and what didn’t work. That is essentially the main point, no pun intended, of the bullet journal method.

Why use a notebook? According to a New York Times article titled “Why is Productivity so Weak?” every year from 1950 to 2000 Americans increased their productivity around 2.3%. However, per the Bureau of Labor Statistics, not until 2005 did we start to see productivity decrease on a year by year basis. Carroll attributes this decrease in productivity to an increase in technology, information overload, and other online distractions. He goes on to suggest that when you are forced to write, you are also forced to unplug and, hopefully, bring more clarity to your thoughts.

You may be wondering “Why not use a software or a phone application instead of a notebook?” Flexibility. Today’s organizational applications have a tendency to do one task extremely well, or many tasks not so well. With a notebook, you are in control, and you can customize as little or as much as needed.

Although your Bujo can be a place of combining several important aspects of your life, not everything is to be included. Things not to be included in your journal: passwords! Passwords and other potentially sensitive information shouldn’t live in your handwritten notebook. Much like a checkbook from your bank, your BuJo is something you likely would not want to lose. For a list of potential ways to store your password, you may review our previous blog on this.

At DWM, we have several organizational tools and processes to assist us in servicing our clients. Our core software for relationship management and consistent workflows is Junxure, the leading Client Relationship Management (CRM) software in our industry. In addition to Junxure, our monthly, weekly and daily checklist enables us to make sure we never miss a beat when it comes to assisting our clients with their long-term goals and adding value on a continual, proactive, basis.

In a world where 5-year-olds now know how to use an iPad better than some Millennials, it may not hurt to go back to the basics. For some, these organization pieces come as second nature, but for others, it does not. For your personal life and day to day activities, you may consider the addition of a Bullet Journal (BuJo).

https://dwmgmt.com/