As an investor, it was a historic moment to witness the Philippine Stock Exchange shut down last year owing to the growing threat of the pandemic. The country was, in fact, the first stock exchange in the world to do so.
The PSEI dropped from 7,800 in January to 4,000 shortly after the closing of the stock exchange in March, a level last seen in 2010. The drop erased all the paper gains in one’s portfolio from the past decade. It was a scary moment.
However, while 2020 will forever be the year that everyone would like to forget, it has nevertheless taught us important lessons that we’ll remember for the rest of our life.
So, as the PSEI hovers around 6,500 today, I took a pause and looked back at my realizations and the financial lessons I’ve learned from a year of staying at home.
Personal Finance
The importance of having an emergency fund.
I had one year’s worth of my family’s expenses as my emergency fund. Having that much savings spared me and my family from having financial worries. It allowed us to focus more on our health and safety.
I’ve always asked myself if having one year’s worth of emergency fund was too much. But I realized that if you’re financially supporting more than 3 people, then that isn’t too much at all.
The non-essentials in my life.
With everything closed during the first few months, I missed doing a lot of things such as watching movies at the cinema, dining out and having coffee with friends, and getting a massage.
But as I got used to staying at home, I realized that not being able to do those things was not really a big deal. And in the greater scheme of things, what’s truly important are maintaining that connection with friends (albeit virtually for now) and learning self-care at home.
The merits of negative visualization
Negative visualization is a mental strategy where one will think about the many ways that the future can go badly for you. When done carefully, it can help you contemplate possible courses of action to prevent them from happening or how to cope if any of them happens.
I imagined a lot of possible futures, which of course included getting sick of COVD-19 and even the worst-case scenario of death. Each case I considered, while unfortunate, I felt less anxious about because confronting them in my mind allowed me to think of solutions rationally.
Investments
The role of bonds.
I’ve never been a fan of investing in bonds and bond funds. However, last year made me appreciate how important it is to include fixed income assets in one’s portfolio. Moreover, it’s another proof for me why it’s essential to diversify.
The market always recovers.
To see the stock market dive last year was both scary and exciting. There was uncertainty, but there was also confidence in the market’s recovery, and the only question was when. Those who were brave enough to invest more last year are now enjoying good gains.
There’s still a lot of uncertainty as to how this pandemic will proceed. But we can be certain that governments and central banks will come up with fiscal policies that will try to restore economic balance.
And thus, it’s really time in the market rather than timing the market that matters in the long run.
Why matching your investments with your goals is important
Low-risk investments for short-term goals. Moderate-risk investments for medium-term goals. High-risk investments for long-term goals. This is how I invest, and the pandemic has shown me why this investing strategy is effective and beautiful.
My short-term goals remained safe because they were in low-risk instruments. And my long-term goals got a boost from the immediate recovery of the market as I continued investing every month in equities last year.
Despite the volatility and uncertainty in the market, I was able to remain calm and confident. The most that I had to do was to check and evaluate how the pandemic affected my medium-term goals and what I can do to stay on track.
Self-Improvement
The beauty of a daily routine.
Last year, I wrote about the benefits of having a daily routine because it was one of the things that helped me stay sane and productive at home.
With no events, appointments, and meetings to attend to, it’s easy to fall into a lazy stupor of wasteful activities. It was indeed fortunate that I stumbled upon an article during that time, which advised why a daily routine is a great way to cope with being stuck at home.
The benefits of deep work.
Watching movies at the cinema was replaced with watching videos on YouTube and somehow, I found myself consuming a lot of productivity videos last year. Particularly, I watched a lot of Thomas Frank, Matt D’Avella, and Ali Abdaal.
I even published a podcast episode on one of the productivity strategies I learned, which I still do until today.
Last year was also the time that I discovered the benefits of scheduling time for doing deep work, which is a period of distraction-free work dedicated to imagination, analysis, and creation.
And those deep work sessions were the reason why I was able to grow my podcast, upload daily videos on YouTube, and despite the pandemic, to significantly grow my monthly income.
As I’m writing this, I just realized how there’s so much I can share about my experience of doing deep work. So, I’ll surely write more about this in a future blog post.
How about you? What are your realizations and the financial lessons you learned from the past 365 days? I hope you can share them in the comments because I would love to read about it.