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- Last week I invested $2,000 in a general investment account for my daughters, hoping to earn higher returns than we would in a high-interest savings account.
- I spoke with a financial adviser who told me the worst was behind us, but the economic news over the past week proved him wrong.
- Still, I'm leaving my money invested in hopes that it will still earn a decent return in the long run.
Ten days ago, I opened an investment account as a means for saving for my two daughters, who are 1 and 5.
I had been intending to transfer a portion of their savings into an investment account for months in order to get a higher rate of return. With COVID-19 market concerns in the news, investing was at the forefront of my mind. I plan to have the money invested for at least 10-15 years, so I wasn't worried about short-term market drops. I figured with prices low, it was a good time to buy.
I opened the account on March 7, but because that was a Saturday the funds ($2,000) were withdrawn on March 9, the day the stock market fell nearly 8%. Still, I told myself I had made the right decision. I even asked experts about it, and one financial planner told me not to worry: big drops rarely signal the start of a bear market (a market decline of 20% from recent highs), he said. Hearing that, I breathed a sigh of relief.
And yet, two days later the market was officially in bear market territory, for the first time in 11 years. As the bad news continued to pour in about COVID-19 and its economic implications, I began second guessing myself and worrying that I had made the wrong choice.
In times of uncertainty, having cash on hand feels safe
Before opening the investment account, my daughters' savings were in a high-interest savings account. It usually took me about three days to transfer money from that account to one I could access more readily, like my checking.
Since I opened a general investment account, I can withdraw the money (minus any losses) in about the same amount of time without penalty (this would be different if the money were in a tax-deferred account like a retirement or college-savings account).
And yet, it still feels scary to have the money in the market. Having a savings account gives me a sense of security: I know exactly where my funds are and how much is there. Having money in the market right now feels the opposite of secure. No one knows what the coming weeks and months will bring - not me, and not financial professionals like the man who told me the worst was behind us.
If I had any idea 10 days ago what was going to happen to the market this week, I would not have invested right now. Of course, hindsight is 20/20 and I can't change the past.
Despite my trepidation, I'm keeping my money invested
I've watched the market continue to decline over the past week, but I've left my money invested. I have no plans to take it out. While the timing wasn't ideal for starting an investment account, that decision has been made, so I'm sticking with my plan to not touch the money for 10-15 years.
Part of my reasoning is that leaving my money in the market feels like the most socially responsible thing to do. I'm trying to follow my morals as I respond to COVID-19. I'm practicing social distancing and washing my hands constantly. When I encountered a whole pile of toilet paper at the supermarket, I took just one package, since that's all my family needs for the next few weeks.
My $2,000 is a minuscule amount in the US economy. But, it's the tiny part that I can control. Maybe if I and other nervous investors follow their plans and leave money in the market, we can collectively make a small difference. Then again, maybe I'm kidding myself. Right now no one knows.
I'm lucky that my income has only been slightly diminished by the virus and the global response. I should be able to continue to cover expenses, and I never planned on touching the money that's invested anyway. There's privilege in being able to ride out the market fluctuations, but I'm going to try to stick with my original plan and do just that.
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