The Importance Of Perspective & Priorities

rogernusbaum

We've all spent a lot of time lately managing the ways that the crisis impacts our lives individually. We all have what I call constituencies. Our family is one constituency, our work is another, in my case the fire department is a constituency and so on.

For my family, including my wife's family, there is concern about whether everyone is making good decisions regarding distancing and all the other precautions we believe will keep people healthy. For my work, there is time spent communicating with clients, staying informed, placing the occasional trade as needed and so on. The fire department is working on protocols for medicals that might involve the Coronavirus, trying to figure out how to alter the ways in which we train. In the middle of all of this we had a huge snow storm is a whole different sort of work that needs to be done and as you can see from the picture in the header of this post I had a bit of a problem with the snow.

We are also our own constituency of our health in terms of food, exercise (hopefully everyone exercises), our finances and everything else. The subject of finances also includes portfolio balances. The keys to riding these events out is having an asset allocation that aligns with your tolerances for volatility. Depending on your stage of life, being able to meet cash needs for a while is also important. With these two factors properly applied, then all you have to do is ride this out. In this instance, time is your greatest haven. We know this will end and we know the market will make a new high. What we don't know is where the bottom is and we don't know when this will end. The uncertainty is scary, it causes emotions. Some people will, unfortunately, make it worse for themselves by obsessing over daily price movements, read every negative piece they can find about the virus which contributed to increased emotion.

The above paragraph is not hindsight advice, these are things we've been discussing here since I started blogging in 2004.

As I said to someone the other day, we know what is written on the last page of this book. The unknowns as stated above persist but we know how it ends. In that light the best thing we can do is spend time doing things that give our emotions a break, this gives us periods of time where we are not thinking about markets, portfolio values, rates of spread, fatality rates and so on.

Time spent in the sun (prudently) is important. Exercise is important, I have one workout I've been doing at home on off days from the gym involving jump rope and pushups that is brutal (I am not going to the gym for now of course). For some people (me included) taking a timeout to watch a couple of TV shows is a time to not think about markets and viruses. I've talked countless times about one of the benefits of actively volunteering is that it requires much different problem solving skills than work. Family time that you can enjoy is always important for a fulfilling life, never moreso than now. I found a fantastic series of articles at The Athletic about the top 100 baseball players of all time.

If your engagement with markets is that you're trying to navigate through retirement or have enough accumulated when you do retire then you don't need to obsess over markets and portfolio values if you have the right allocation and cash available. You can instead focus on what's more important which hopefully is your health and your family and that is perspective that I hope more people will come to.

Further perspective relates to gratitude. If you're reading an investment blog, you're more likely to be able to weather this financially which is a great thing to not have to worry about. In my town, things are starting to normalize at places like Costco (not having to wait in line for an hour to get it). Shelves are not totally full but more than they were which is something of a relief. Infrastructure appears to be working. This all adds up to being able to stay home, have what you need and be able to occupy your time.

I realize that many people are not so fortunate, maybe the majority.

Further perspective relates to your health. This is a time to be more diligent with health habits not less. Exercise, vitamin D from prudent exposure to the sun and a good diet (eat less sugar/carbs) will bolster immune systems and we can all benefit from that.

Now for the ultimate perspective. If you're reading this you are alive. Yesterday in the middle of the day we had a call for the fire department. I did CPR on a patient quite a bit younger than me who had multiple chronic maladies related to metabolic syndrome. While we can't be certain of the cause of death, it would be reasonable to think it was an accumulation of neglected health behaviors. There's no indication is was Coronavirus but we wore PPE like it was and then deconned everything including our shoes.

In your list of life priorities where does your health fall, where does your family fall, how many other things are ahead of your portfolio? The more adequately you've prepared your portfolio with adequate cash, proper asset allocation, keeping in touch with your actual time horizon then the less likely your portfolio needs to burden you at this time. All the better if you've been able to add some defense to the portfolio in a manner that has softened the blow even if just on a relative basis.

A well diversified, properly allocated portfolio will take care of itself and if nothing else time will bail investors out. I hope everyone reading this will focus on what their real priorities are.