'‘This Isn’t a Dry Run’: How to Be Ready for More Financial Pain' diff viewer (3/4)

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‘This Isn’t a Dry Run’: How to Be Ready for More Financial Pain	‘This Isn’t a Dry Run’: How to Be Ready for More Financial Pain
2020-06-09 23:48:18 UTC	2020-06-13 05:38:37 UTC (3 days later)
When thousands of people are sick and dying, the stock market isn’t the world’s most pressing problem. It may even be unseemly to worry about it at all.	When thousands of people are sick and dying, the stock market isn’t the world’s most pressing problem. It may even be unseemly to worry about it at all.
Yet the market’s steep fall matters, not just for hedge fund investors but for millions of hardworking people who have poured their savings into it, hoping to generate enough for a decent retirement, an education, a house — really, for anything important in life that costs money.	Yet the market’s steep fall matters, not just for hedge fund investors but for millions of hardworking people who have poured their savings into it, hoping to generate enough for a decent retirement, an education, a house — really, for anything important in life that costs money.
What we’ve just experienced in the market is a big setback. The first three months of the year were the worst for the S&P 500 since 2008, and the worst for the Dow Jones industrial average since 1987.	What we’ve just experienced in the market is a big setback. The first three months of the year were the worst for the S&P 500 since 2008, and the worst for the Dow Jones industrial average since 1987.
But what really counts is what you actually held in your portfolio. If you had a well-diversified array of both stocks and bonds, you probably wouldn’t have lost all that much — though you may have already lost more than you feel you can handle.	But what really counts is what you actually held in your portfolio. If you had a well-diversified array of both stocks and bonds, you probably wouldn’t have lost all that much — though you may have already lost more than you feel you can handle.
It’s worth re-examining the classic asset allocation strategies. It’s not too late to adjust course.	It’s worth re-examining the classic asset allocation strategies. It’s not too late to adjust course.
“This isn’t a dry run,” David Booth, the co-founder of the firm Dimensional Fund Advisors, told me on the phone this week. “This is real life, unfortunately or not, and I’d tell someone who is seriously stressed out by this that they may need to rethink their strategy, and find something they can relax with.”	“This isn’t a dry run,” David Booth, the co-founder of the firm Dimensional Fund Advisors, told me on the phone this week. “This is real life, unfortunately or not, and I’d tell someone who is seriously stressed out by this that they may need to rethink their strategy, and find something they can relax with.”
In late December, I also chatted with Mr. Booth — the benefactor for whom the University of Chicago’s Booth School of Business is named — about his approach to long-term investing. Like Jack Bogle, the founder of Vanguard, he recommended using low-cost index funds.	In late December, I also chatted with Mr. Booth — the benefactor for whom the University of Chicago’s Booth School of Business is named — about his approach to long-term investing. Like Jack Bogle, the founder of Vanguard, he recommended using low-cost index funds.
The key, though, for achieving some degree of personal comfort, is to find an asset allocation that is appropriate for you. How do you accomplish that?	The key, though, for achieving some degree of personal comfort, is to find an asset allocation that is appropriate for you. How do you accomplish that?
Back in those relatively peaceful days just a few months ago, he suggested imagining a stock market decline of more than 50 percent, one like the terrible bear market of October 2007 through February 2009.	Back in those relatively peaceful days just a few months ago, he suggested imagining a stock market decline of more than 50 percent, one like the terrible bear market of October 2007 through February 2009.
In such a decline, he asked, what kind of losses could you live with? As it turned out, that wasn’t a theoretical question. This week, he said ruefully, “For a lot of people, that kind of pain’s already here.”	In such a decline, he asked, what kind of losses could you live with? As it turned out, that wasn’t a theoretical question. This week, he said ruefully, “For a lot of people, that kind of pain’s already here.”
The market dropped more than 33 percent before action by the Federal Reserve turned stocks around on March 23. I intend to keep buying equities steadily — but with the coronavirus raging, unemployment mounting and the global economy shrinking rapidly, it would not shock me if further declines were to bring the stock market more than 50 percent from its February peak.	The market dropped more than 33 percent before action by the Federal Reserve turned stocks around on March 23. I intend to keep buying equities steadily — but with the coronavirus raging, unemployment mounting and the global economy shrinking rapidly, it would not shock me if further declines were to bring the stock market more than 50 percent from its February peak.
For someone near retirement or already there, a classic allocation might be 25 percent stock and 75 percent bonds, he said. The hefty bond component of such a portfolio is intended to provide a buffer, providing some income while protecting him from losses in the stock market.	For someone near retirement or already there, a classic allocation might be 25 percent stock and 75 percent bonds, he said. The hefty bond component of such a portfolio is intended to provide a buffer, providing some income while protecting him from losses in the stock market.
At the age of 73, that’s the recipe he personally favors. “I want to be able to relax, to forget about the market, and sleep at night,” he said. “For me, this kind of portfolio lets me do that.”	At the age of 73, that’s the recipe he personally favors. “I want to be able to relax, to forget about the market, and sleep at night,” he said. “For me, this kind of portfolio lets me do that.”

How has Mr. Booth’s conservative portfolio been working this year? He told me he hasn’t checked. “It will be OK,” he said. “That’s the point — setting up something you don’t need to look at, so you can do other things.”	How has Mr. Booth’s conservative portfolio been working this year? He told me he hasn’t checked. “It will be OK,” he said. “That’s the point — setting up something you don’t need to look at, so you can do other things.”
I checked for him and found that with some important qualifications, it has fared about as well as expected. Dimensional’s Global Allocation fund has that 25/75 stock/bond asset allocation, for example. It has lost money this year, but not nearly as much as the S&P 500.	I checked for him and found that with some important qualifications, it has fared about as well as expected. Dimensional’s Global Allocation fund has that 25/75 stock/bond asset allocation, for example. It has lost money this year, but not nearly as much as the S&P 500.
In the first quarter, the fund declined about 6 percent, including dividends, compared with a loss, with dividends, of about 20 percent in the S&P 500, according to FactSet. The Vanguard Target Retirement Income fund, another conservative fund with a fairly similar asset allocation — 30 percent stock and 70 percent bonds — also lost about 6 percent.	In the first quarter, the fund declined about 6 percent, including dividends, compared with a loss, with dividends, of about 20 percent in the S&P 500, according to FactSet. The Vanguard Target Retirement Income fund, another conservative fund with a fairly similar asset allocation — 30 percent stock and 70 percent bonds — also lost about 6 percent.
That doesn’t strike me as much to worry about, not for a long-term investment.	That doesn’t strike me as much to worry about, not for a long-term investment.
But for retirees living on such a portfolio, it may be a different matter, because those figures understate the intensity of the downturn at its worst, from Feb. 19 to March 23.	But for retirees living on such a portfolio, it may be a different matter, because those figures understate the intensity of the downturn at its worst, from Feb. 19 to March 23.
Consider that the DFA fund lost 10.5 percent in that short period, according to FactSet, and that the Vanguard fund lost 12.5 percent. That’s much better than the S&P 500’s 34 percent loss in the same stretch but, still, if you find losses like that too excruciating, you could readjust now by selling stock and holding even more bonds.	Consider that the DFA fund lost 10.5 percent in that short period, according to FactSet, and that the Vanguard fund lost 12.5 percent. That’s much better than the S&P 500’s 34 percent loss in the same stretch but, still, if you find losses like that too excruciating, you could readjust now by selling stock and holding even more bonds.
~~Updated June 5, 2020~~	Updated June 12, 2020
	Touching contaminated objects and then infecting ourselves with the germs is not typically how the virus spreads. But it can happen. A number of studies of flu, rhinovirus, coronavirus and other microbes have shown that respiratory illnesses, including the new coronavirus, can spread by touching contaminated surfaces, particularly in places like day care centers, offices and hospitals. But a long chain of events has to happen for the disease to spread that way. The best way to protect yourself from coronavirus — whether it’s surface transmission or close human contact — is still social distancing, washing your hands, not touching your face and wearing masks.
So far, the evidence seems to show it does. A widely cited paper published in April suggests that people are most infectious about two days before the onset of coronavirus symptoms and estimated that 44 percent of new infections were a result of transmission from people who were not yet showing symptoms. Recently, a top expert at the World Health Organization stated that transmission of the coronavirus by people who did not have symptoms was “very rare,” but she later walked back that statement.	So far, the evidence seems to show it does. A widely cited paper published in April suggests that people are most infectious about two days before the onset of coronavirus symptoms and estimated that 44 percent of new infections were a result of transmission from people who were not yet showing symptoms. Recently, a top expert at the World Health Organization stated that transmission of the coronavirus by people who did not have symptoms was “very rare,” but she later walked back that statement.
A study by European scientists is the first to document a strong statistical link between genetic variations and Covid-19, the illness caused by the coronavirus. Having Type A blood was linked to a 50 percent increase in the likelihood that a patient would need to get oxygen or to go on a ventilator, according to the new study.	A study by European scientists is the first to document a strong statistical link between genetic variations and Covid-19, the illness caused by the coronavirus. Having Type A blood was linked to a 50 percent increase in the likelihood that a patient would need to get oxygen or to go on a ventilator, according to the new study.
The unemployment rate fell to 13.3 percent in May, the Labor Department said on June 5, an unexpected improvement in the nation’s job market as hiring rebounded faster than economists expected. Economists had forecast the unemployment rate to increase to as much as 20 percent, after it hit 14.7 percent in April, which was the highest since the government began keeping official statistics after World War II. But the unemployment rate dipped instead, with employers adding 2.5 million jobs, after more than 20 million jobs were lost in April.	The unemployment rate fell to 13.3 percent in May, the Labor Department said on June 5, an unexpected improvement in the nation’s job market as hiring rebounded faster than economists expected. Economists had forecast the unemployment rate to increase to as much as 20 percent, after it hit 14.7 percent in April, which was the highest since the government began keeping official statistics after World War II. But the unemployment rate dipped instead, with employers adding 2.5 million jobs, after more than 20 million jobs were lost in April.
Mass protests against police brutality that have brought thousands of people onto the streets in cities across America are raising the specter of new coronavirus outbreaks, prompting political leaders, physicians and public health experts to warn that the crowds could cause a surge in cases. While many political leaders affirmed the right of protesters to express themselves, they urged the demonstrators to wear face masks and maintain social distancing, both to protect themselves and to prevent further community spread of the virus. Some infectious disease experts were reassured by the fact that the protests were held outdoors, saying the open air settings could mitigate the risk of transmission.	Mass protests against police brutality that have brought thousands of people onto the streets in cities across America are raising the specter of new coronavirus outbreaks, prompting political leaders, physicians and public health experts to warn that the crowds could cause a surge in cases. While many political leaders affirmed the right of protesters to express themselves, they urged the demonstrators to wear face masks and maintain social distancing, both to protect themselves and to prevent further community spread of the virus. Some infectious disease experts were reassured by the fact that the protests were held outdoors, saying the open air settings could mitigate the risk of transmission.
Exercise researchers and physicians have some blunt advice for those of us aiming to return to regular exercise now: Start slowly and then rev up your workouts, also slowly. American adults tended to be about 12 percent less active after the stay-at-home mandates began in March than they were in January. But there are steps you can take to ease your way back into regular exercise safely. First, “start at no more than 50 percent of the exercise you were doing before Covid,” says Dr. Monica Rho, the chief of musculoskeletal medicine at the Shirley Ryan AbilityLab in Chicago. Thread in some preparatory squats, too, she advises. “When you haven’t been exercising, you lose muscle mass.” Expect some muscle twinges after these preliminary, post-lockdown sessions, especially a day or two later. But sudden or increasing pain during exercise is a clarion call to stop and return home.	Exercise researchers and physicians have some blunt advice for those of us aiming to return to regular exercise now: Start slowly and then rev up your workouts, also slowly. American adults tended to be about 12 percent less active after the stay-at-home mandates began in March than they were in January. But there are steps you can take to ease your way back into regular exercise safely. First, “start at no more than 50 percent of the exercise you were doing before Covid,” says Dr. Monica Rho, the chief of musculoskeletal medicine at the Shirley Ryan AbilityLab in Chicago. Thread in some preparatory squats, too, she advises. “When you haven’t been exercising, you lose muscle mass.” Expect some muscle twinges after these preliminary, post-lockdown sessions, especially a day or two later. But sudden or increasing pain during exercise is a clarion call to stop and return home.
States are reopening bit by bit. This means that more public spaces are available for use and more and more businesses are being allowed to open again. The federal government is largely leaving the decision up to states, and some state leaders are leaving the decision up to local authorities. Even if you aren’t being told to stay at home, it’s still a good idea to limit trips outside and your interaction with other people.	States are reopening bit by bit. This means that more public spaces are available for use and more and more businesses are being allowed to open again. The federal government is largely leaving the decision up to states, and some state leaders are leaving the decision up to local authorities. Even if you aren’t being told to stay at home, it’s still a good idea to limit trips outside and your interaction with other people.
Touching contaminated objects and then infecting ourselves with the germs is not typically how the virus spreads. But it can happen. A number of studies of flu, rhinovirus, coronavirus and other microbes have shown that respiratory illnesses, including the new coronavirus, can spread by touching contaminated surfaces, particularly in places like day care centers, offices and hospitals. But a long chain of events has to happen for the disease to spread that way. The best way to protect yourself from coronavirus — whether it’s surface transmission or close human contact — is still social distancing, washing your hands, not touching your face and wearing masks.
Common symptoms include fever, a dry cough, fatigue and difficulty breathing or shortness of breath. Some of these symptoms overlap with those of the flu, making detection difficult, but runny noses and stuffy sinuses are less common. The C.D.C. has also added chills, muscle pain, sore throat, headache and a new loss of the sense of taste or smell as symptoms to look out for. Most people fall ill five to seven days after exposure, but symptoms may appear in as few as two days or as many as 14 days.	Common symptoms include fever, a dry cough, fatigue and difficulty breathing or shortness of breath. Some of these symptoms overlap with those of the flu, making detection difficult, but runny noses and stuffy sinuses are less common. The C.D.C. has also added chills, muscle pain, sore throat, headache and a new loss of the sense of taste or smell as symptoms to look out for. Most people fall ill five to seven days after exposure, but symptoms may appear in as few as two days or as many as 14 days.
If air travel is unavoidable, there are some steps you can take to protect yourself. Most important: Wash your hands often, and stop touching your face. If possible, choose a window seat. A study from Emory University found that during flu season, the safest place to sit on a plane is by a window, as people sitting in window seats had less contact with potentially sick people. Disinfect hard surfaces. When you get to your seat and your hands are clean, use disinfecting wipes to clean the hard surfaces at your seat like the head and arm rest, the seatbelt buckle, the remote, screen, seat back pocket and the tray table. If the seat is hard and nonporous or leather or pleather, you can wipe that down, too. (Using wipes on upholstered seats could lead to a wet seat and spreading of germs rather than killing them.)	If air travel is unavoidable, there are some steps you can take to protect yourself. Most important: Wash your hands often, and stop touching your face. If possible, choose a window seat. A study from Emory University found that during flu season, the safest place to sit on a plane is by a window, as people sitting in window seats had less contact with potentially sick people. Disinfect hard surfaces. When you get to your seat and your hands are clean, use disinfecting wipes to clean the hard surfaces at your seat like the head and arm rest, the seatbelt buckle, the remote, screen, seat back pocket and the tray table. If the seat is hard and nonporous or leather or pleather, you can wipe that down, too. (Using wipes on upholstered seats could lead to a wet seat and spreading of germs rather than killing them.)
Taking one’s temperature to look for signs of fever is not as easy as it sounds, as “normal” temperature numbers can vary, but generally, keep an eye out for a temperature of 100.5 degrees Fahrenheit or higher. If you don’t have a thermometer (they can be pricey these days), there are other ways to figure out if you have a fever, or are at risk of Covid-19 complications.	Taking one’s temperature to look for signs of fever is not as easy as it sounds, as “normal” temperature numbers can vary, but generally, keep an eye out for a temperature of 100.5 degrees Fahrenheit or higher. If you don’t have a thermometer (they can be pricey these days), there are other ways to figure out if you have a fever, or are at risk of Covid-19 complications.
The C.D.C. has recommended that all Americans wear cloth masks if they go out in public. This is a shift in federal guidance reflecting new concerns that the coronavirus is being spread by infected people who have no symptoms. Until now, the C.D.C., like the W.H.O., has advised that ordinary people don’t need to wear masks unless they are sick and coughing. Part of the reason was to preserve medical-grade masks for health care workers who desperately need them at a time when they are in continuously short supply. Masks don’t replace hand washing and social distancing.	The C.D.C. has recommended that all Americans wear cloth masks if they go out in public. This is a shift in federal guidance reflecting new concerns that the coronavirus is being spread by infected people who have no symptoms. Until now, the C.D.C., like the W.H.O., has advised that ordinary people don’t need to wear masks unless they are sick and coughing. Part of the reason was to preserve medical-grade masks for health care workers who desperately need them at a time when they are in continuously short supply. Masks don’t replace hand washing and social distancing.
If you’ve been exposed to the coronavirus or think you have, and have a fever or symptoms like a cough or difficulty breathing, call a doctor. They should give you advice on whether you should be tested, how to get tested, and how to seek medical treatment without potentially infecting or exposing others.	If you’ve been exposed to the coronavirus or think you have, and have a fever or symptoms like a cough or difficulty breathing, call a doctor. They should give you advice on whether you should be tested, how to get tested, and how to seek medical treatment without potentially infecting or exposing others.
If you’re sick and you think you’ve been exposed to the new coronavirus, the C.D.C. recommends that you call your healthcare provider and explain your symptoms and fears. They will decide if you need to be tested. Keep in mind that there’s a chance — because of a lack of testing kits or because you’re asymptomatic, for instance — you won’t be able to get tested.	If you’re sick and you think you’ve been exposed to the new coronavirus, the C.D.C. recommends that you call your healthcare provider and explain your symptoms and fears. They will decide if you need to be tested. Keep in mind that there’s a chance — because of a lack of testing kits or because you’re asymptomatic, for instance — you won’t be able to get tested.
Note, however, that even many bonds and bond funds faltered in that period. The S&P Aggregate Bond index, which measures the broad bond market, did not rise, as bonds often do in stock-market downturns. It fell in that brief stretch, albeit by less than 1 percent. Only Treasury bonds held their own, and, even here, there were problems.	Note, however, that even many bonds and bond funds faltered in that period. The S&P Aggregate Bond index, which measures the broad bond market, did not rise, as bonds often do in stock-market downturns. It fell in that brief stretch, albeit by less than 1 percent. Only Treasury bonds held their own, and, even here, there were problems.
Large exchange-traded bond funds run by BlackRock, State Street and Vanguard all traded at prices lower than those being offered by their underlying bonds. This unusual market distortion would have cost you money if you had tried to sell one of these E.T.F.s at the depth of the market’s troubles, though the situation straightened out after the Fed intervened heavily in the markets.	Large exchange-traded bond funds run by BlackRock, State Street and Vanguard all traded at prices lower than those being offered by their underlying bonds. This unusual market distortion would have cost you money if you had tried to sell one of these E.T.F.s at the depth of the market’s troubles, though the situation straightened out after the Fed intervened heavily in the markets.
The lesson from this brief bond glitch is, I think, that you do not want to put yourself in a position in which you must make urgent short-term sales. “Raise cash when things are calm,” Mr. Booth said.	The lesson from this brief bond glitch is, I think, that you do not want to put yourself in a position in which you must make urgent short-term sales. “Raise cash when things are calm,” Mr. Booth said.