And it finally happened. The market (i.e., S&P 500) fell just over 10%. There was momentary panic. Brokerage and robo-advisor websites crashed. Parents were looking for their kids. Kids were ripping off Barbie doll heads. It was CRAZY!
Well not really. The mini-market collapse only lasted from Jan 26th to Feb 8th.
Image may be NSFW.
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This event was similar to the momentary +10% correction from late Dec 2015 to mid Feb 2016. Roughly same time period and short lived.
What did I do?
- HSA investments: I invested a few hundred over multiple days from our uninvested HSA balance.
- 401k reallocation: I reallocated a $2,000 bond holding in my 401k to equities (mostly S&P 500).
- Options!: Bought an Apple call and sold a Tesla put. I made $720 on a balance of $5500 or a quick 13% return. Although I’m not going to annualize it because it’s not easily repeatable, it would be a significant total annual return.
- New investments: I also tried to put more money into my wife’s Vanguard Roth IRA, but because her name was different on the account (pre-marriage), I couldn’t transfer money over to invest. BLAST!
What did I learn?
- Markets correct: Deal with it.
- Crash cash: Have money on hand for these buying opportunities. Although I tried, I couldn’t move money fast enough into the wife’s IRA. Subpoint: make sure your account registrations are up to date!
- Leverage with options: Use some leverage to amplify your returns. I did this with options.
- Align trading to objectives: Get in, Get out and/or buy and hold, depending on the account and it’s objectives. In other words, don’t trade your 401k and don’t buy and hold in your options account.
- No cash? then optimize: If don’t have money, look at rebalancing your portfolio from more conservative investments to more aggressive investments. Rebalancing is easier to do if it’s in a qualified (e.g., 401k/roth IRA/Trad IRA/HSA/403b/ etc) account. Otherwise it may be a taxable event.
I’ve experienced several market crashes (e.g., 2008 crash/recession) since i’ve had money to invest. Aside from continually investing in my 401k during those periods, this is the first time I’ve made some moves to take advantage of the crash and I feel REALLY GOOD about my decisions. Makes me excited thinking about the next one.
So next correction, invest/reallocate your $$$ and make your faces look like this:
Image may be NSFW.
Clik here to view.
What tactics did you employ when the market dropped off? Any other things you did that I may have not mentioned?
