Investing During Corona and Beyond

Market crashes. Soaring rallies. Unpredictable swings. If there’s one thing the past few years, especially the “Corona times,” have taught us, it’s that the market’s next move is anyone’s guess. But while we can’t predict when these events will happen, we can certainly prepare. For me, risk isn’t just about volatility; it’s about owning assets without fundamental strength or investing without a long-term vision. This post dives into the strategies and mindset I found crucial for navigating turbulent markets, lessons forged during the pandemic that remain incredibly relevant for building a resilient portfolio today and beyond.

Core Philosophy: Weathering Storms with a Long-Term View

My investment approach, then and now, is anchored in a few core beliefs:

• Long-Term Horizon: I plan to invest for 15+ years. This perspective helps to smooth out short-term market noise and focus on the bigger picture.
• Invest in Fundamentals: The underlying assets in my portfolio, whether individual stocks or ETFs, must be fundamentally strong. This means businesses with solid financials, good leadership, and sustainable competitive advantages.
• Strategic, Not Drastic, Shifts: While I believe in adapting to changing market conditions, my approach to risk management involves making relatively slight shifts in portfolio allocations. Trying to time the market perfectly with drastic moves is a recipe for disaster. It’s about adjusting the sails, not abandoning ship.

During the peak of the pandemic uncertainty, this philosophy was put to the test. My strategy involved using M1 Finance to make dynamic adjustments to my “pies” – a concept I’ll elaborate on.

Lessons from the “Corona Pies”: Adapting to Extreme Volatility

While the specific “Corona-era pies” I created back in 2020 are now part of history, the thinking behind them offers timeless lessons in portfolio adaptation. Below are some illustrative images of how my M1 Finance dashboard looked with those specialized allocations. Note that these are for historical context; my current allocations are different and more evergreen.

The core of my portfolio at the time excluded the two highly specialized “Corona” pies; those were temporary tactical adjustments. The “Forever Funds” and “Businesses By Sector” pies represented my long-term holdings.

The thinking was:

• Defensive Positioning: When uncertainty peaked, increasing allocations to lower-volatility assets, cash equivalents, or reliable dividend-paying stocks made sense. This was the idea behind my “During Corona Times” and “Basically Cash with Dividends” pies.
• Recovery Positioning: As market sentiment began to shift and a path to recovery (like vaccine development) became clearer, I strategically reallocated towards assets poised for a rebound. This was the “Corona Recovery” pie.

The key lesson wasn’t about the exact pandemic-era pies, but the principle of having a flexible framework to adjust risk exposure within a long-term strategy. As the situation normalized, these temporary pies were phased out, and capital was redeployed into my core, long-term holdings.

(As a bonus, the original post shared a link to my M1 portfolio at the time: https://m1.finance/IAi6pRzQcyI8. Please note this is a snapshot from 2020 and does not reflect my current portfolio, which has evolved.)

Building an Evergreen Portfolio for All Seasons

My current portfolio, and what I advocate for long-term resilience, is built around a core of diversified, low-cost ETFs. This approach helps weather various market cycles. A typical structure might include:

• Broad US Market Exposure: ETFs like VTI (Vanguard Total Stock Market ETF) or SPY (SPDR S&P 500 ETF).
• International Diversification: ETFs like VXUS (Vanguard Total International Stock ETF) to capture growth outside the US.
• Bond Allocation: ETFs like BND (Vanguard Total Bond Market ETF) to provide stability and reduce overall portfolio volatility.
• Real Estate: ETFs like VNQ (Vanguard Real Estate ETF) for exposure to the real estate sector and its potential income.
• Specific Sectors/Themes (Smaller Allocation): Depending on your outlook, you might include smaller allocations to specific sectors (e.g., technology, healthcare) or themes (e.g., clean energy, AI).

Understanding the intrinsic value of the companies within these ETFs or any individual stocks you hold is also paramount. For a detailed breakdown of how I track and analyze such a portfolio, check out my guide on Portfolio Analysis With Google Sheets.

The Temptation of Speculation: Options Trading During Volatile Times

The pandemic also saw a surge in retail options trading. In my original post, I shared an example of a speculative options trade that yielded “nice gains” due to “PERFECT TIMING.”

However, I want to strongly reiterate my original warning: “Although the outcome was good, that doesn’t make this a good decision – it could have gone either way (especially when you trade based on a hunch!)” Options trading, particularly short-term speculation, is incredibly risky. While it can offer the potential for outsized gains, it can also lead to rapid and significant losses. It’s not a strategy for the faint of heart, nor is it a substitute for a disciplined, long-term investment plan. For those who want to learn more about the mechanics and risks, I’ve written a detailed guide on What You Need to Know About Options Trading.

Preparing for Market “Crashes” (and Rallies)

The sentiment “Let it fall!” from my original post might sound dramatic, but for a prepared long-term investor, market downturns can indeed be opportunities to acquire quality assets at a discount. Here’s how to prepare for market volatility, whether it’s a crash or an unexpected surge:

• Don’t Panic: Emotional decisions are rarely good ones in investing. Stick to your long-term plan.
• Maintain Liquidity: Having some cash on the sidelines allows you to buy when others are fearful.
• Dollar-Cost Average: Invest a fixed amount regularly, regardless of market highs or lows. This smooths out your purchase price over time.
• Diversify: Don’t put all your eggs in one basket. A well-diversified portfolio across asset classes and geographies is your best defense.
• Focus on Quality: During downturns, fundamentally strong companies tend to recover better.
• Rebalance Periodically: Market movements can shift your asset allocation. Rebalancing brings it back in line with your targets.

Conclusion: Timeless Wisdom for an Ever-Changing Market

The “Corona era” was a stark reminder of market unpredictability. However, the core principles of sound investing remain timeless: maintain a long-term perspective, invest in fundamentally strong assets, manage risk through thoughtful allocation, and don’t let short-term noise derail your strategy. Platforms like M1 Finance can be invaluable for implementing and maintaining such a strategy. While speculation has its allure, it should be approached with extreme caution and never at the expense of your foundational investments.

By preparing for various market conditions, you can navigate future storms with greater confidence and potentially turn volatility into opportunity.

How do you approach investing during uncertain times? Share your strategies in the comments!