Your Coronavirus Checklist

By Charles Sizemore  |  February 3, 2020

It’s getting nasty out there.

The U.S. declared a national health emergency, and the Center for Disease Control and Prevention said on Friday that nearly 200 U.S. citizens are sitting in quarantine. There are nearly 10,000 confirmed cases globally, more than 200 of which have died.

All of this was enough to give the stock market its worst week in recent memory. The Dow closed Friday down 600 points.

It’s important to keep this in perspective… 10,000 cases and 200 deaths isn’t even rounding error. In a world population of around 7.7 billion people, 10,000 people amounts to 0.0001% of the population. The infamous Spanish flu epidemic of 1918 infected 500 million people, or nearly 30% of the entire world’s population, and killed an estimated 50 million.

The body count will no doubt rise from the current estimate of 10,000. But you’d have to add several zeroes to that figure for it to be a true crisis.

It’s not the virus that’s spooking the stock market. No one legitimately worries this will escalate into 12 Monkeys and wipe out humanity. It’s rather the fear of how people will react to the virus. If shoppers stay away from crowded stores and restaurants out of fear of getting sick, that will have an impact on company profits.

So today, we’re going to come up with a coronavirus portfolio checklist.

No.1: Look at Your Stock Allocation

If you’re worried that coronavirus will tank your stock portfolio, then you have too much of your money in the market.

There’s an old trader’s maxim that you should always sell to the sleeping point, and that applies here.

You don’t have to sell everything and run for the hills. That would be a ridiculous and overly emotional response. But if you have, say, 80% of your portfolio in stocks, maybe you should knock that percentage down to 70%, 50%, or even less, depending on how close to retirement you are.

You should have made moves like this before the virus outbreak. I won’t judge.

But use this scare as an opportunity to reevaluate your portfolio from the top down. If you have too much money riding the market roller coaster, consider taking some out and reallocating to income strategies, active trading strategies that zig when the market zags, or even cold hard cash.

Incidentally, I can help you with that. Click here to check out my Peak Income service, where income strategies are a specialty.

No.2: Separate the Buy-and-Hold Positions from the Trades

I bought some shares of Realty Income (NYSE: O) a little over a decade ago that I swore I would never sell. I’ll reinvest the dividends in additional shares until I need the income in retirement, and then I’ll live off those dividends until I’m dead. My kids or grandkids can sell the shares someday.

That’s my plan.

I say this not to encourage you to run out and buy Realty Income. In fact, I consider the shares overvalued at current prices and wouldn’t put a nickel of new money into them — apart from the dividend reinvestment.

My point is to make a distinction.

Part of my financial plan is to buy and hold Realty Income. If the shares dropped by 50% in a bear market, I’d be fine with that. It would simply mean that my reinvested dividends would buy a lot more shares.

But Realty Income is only a small piece of my total portfolio, and I wouldn’t be comfortable watching my entire nest egg drop by half or more.

So, give your portfolio a good, hard look. What positions would you be comfortable holding through a bear market?

You don’t necessarily have to immediately sell the positions that don’t make the cut. But make sure you have an exit plan — know at what price or under what conditions you’d want to sell.

In Peak Income and Peak Profits, I use stop-losses for that purpose. You might have a different system of your, and that’s fine. Just make sure you have one. It’s not bad investment decisions that ultimately wreck a portfolio; it’s indecision on selling and passively allowing a small loss to snowball into a large one.

No.3: Stick to Your Plan

Finally, don’t let a health scare shake you out of your financial plan.

If the market volatility causes you to get stopped out of a few positions, that’s fine. No harm done.

If you reduce your stock exposure, that’s fine too.

But don’t let this incident give you an excuse to save less in your 401(k) or other retirement plans.

Remember, saving in a 401(k) plan does not automatically mean that you’re dumping money into the stock market. A 401(k) is just a vehicle. Getting the cash into the vehicle and deciding how to invest it once it’s there are two entirely distinct questions.

You should get every cent you can into your 401(k) plan to enjoy the tax break and company matching. If the money sits in a money market fund earning 0%, that might be fine.

But if you’re a high earner and near retirement, the tax break and matching are going be worth far more to you than the potential investment gains.

I have no crystal ball, and I don’t know what happens next here. My best guess is that it gets slightly worse before turning around.

This isn’t the first nasty flu-like epidemic we’ve seen, and it won’t be the last. I don’t see this having a lasting impact on the market, but we can still use the experience as an excuse to take a more critical look at our portfolios.

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Charles Sizemore

Income and Retirement Strategist, Charles Sizemore, CFA specializes on dividend-focused portfolios and building alternative allocations by finding value opportunities outside of the mainstream stock market.

Charles is the executive editor and portfolio manager for Dent Research's premium newsletters, Peak Income and Peak Profits.

He is also a frequent guest on CNBC, Bloomberg TV, Fox Business News and Straight Talk Money Radio, and has been quoted in Barron’s Magazine, The Wall Street Journal, and The Washington Post. He is a frequent contributor to Forbes, GuruFocus, MarketWatch and

Charles holds a master’s degree in Finance and Accounting from the London School of Economics in the United Kingdom and a Bachelor of Business Administration in Finance with an International Emphasis from Texas Christian University in Fort Worth, Texas, where he graduated Magna Cum Laude and as a Phi Beta Kappa scholar. MORE FROM AUTHOR