In times of great volatility there’s always a chance to make a killing. Most of us think about buying low and selling high. However, some daring people also make fortunes when markets tumble. Hedge fund manager, John Paulson, famously made billions by betting against the housing market in 2007 and 2008 just as it was on the verge of collapse.
As a small business mentor for SCORE, I meet clients every week who have great ideas that they’d like to turn into businesses. Since the coronavirus outbreak, several have been trying to figure out how to hit it big – like Mr. Paulson.
Many of these clients have been following money gurus like Rich Dad Poor Dad Robert Kiyosaki who recently tweeted “SAVE MONEY: RU NUTS?” Today, he’s claiming that the government’s multi-trillion-dollar stimulus package will so devalue the dollar against other currencies, that your best move is gold or bitcoin.
I’m not a money genius like Mr. Kiyosaki, and I’m hardly in a position to evaluate an investment in gold or bitcoin, but I think I know what’s best for my clients, who are all working people, mostly of average means. Sit tight. Don’t make any major money decisions until the corona dust settles.
We don’t know how long this will last. It could be another month or another six. We have no idea. If you’re fortunate enough to have a rainy-day fund, hold onto it. You may need it.
If you’re even more fortunate and have some extra cash on top of your rainy-day fund, think carefully before you invest it. Yes, there could be good buy opportunities when the market is down. As one of my clients mentioned the other day, “if you buy a good company now like Apple, Amazon or Google, it’s stock value will certainly go up over the next few years.”
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Yes, I think he’s probably right. But the vast majority of my clients don’t have an extra $10,000 laying around. And even if they did, a 100% return on $10,000 over X years is only $10,000. In other words, nice, but not life changing like Mr. Paulson’s billions. It may make better sense to hold onto your $10,000 in a savings account or CD for now, and continue to (or start to) fund your employee savings plan through regular payroll contributions.
I’ve also noticed a resurgent interest in real estate. People want to buy houses cheap, fix them up and resell them. Many of my clients with little or no real estate experience are seduced by online offers like “How to Flip Houses with No Money Down.” My short response is that there are only a few good deals and many people are chasing them, including professional house hunters and corporate investors that have systems in place to identify, research and procure property. If the coronavirus causes the housing market to crash, I’m sure that there will be more opportunities, but even then, those with experience stand a much better chance to profit.
During the lockdown, I’m encouraging most of my clients to focus on getting by rather than looking for creative profit-making opportunities that take them outside of their usual field of expertise.
What can you do:
- Control your spending. Because stores, restaurants and bars are shut down, it’s easier than ever to curb your spending. Even if you want to dine out, you can’t.
- Cancel old subscriptions that you no longer need or use. You may be surprised how many services are charged to your credit card every month or year.
- If you’ve been laid off, apply for unemployment.
- If you’re losing income because of the lockdown, start a conversation with your landlord. Even though most states enacted a moratorium on evictions through April, see what you can work out with your landlord. Maybe you can pay half now and make up the difference later or apply a portion of your security deposit to your rent? Keep in mind that your landlord may be in a similar situation to you. Just as you rely on your earnings to pay rent, they rely on your rent to cover mortgage, property taxes, insurance, utilities and maintenance.
- If you’re a homeowner with reduced income, many lenders are offering temporary mortgage relief. Click here for a guide to coronavirus mortgage relief options.
- If you’re a small business owner, sole proprietor or independent contractor, click here to learn about a couple of emergency SBA loans that you may not have to pay back. In the interest of disbursing relief quickly, The SBA has streamlined its application process and relaxed underwriting criteria, which means you don’t have to worry (too much) about your credit score.
- If you’re in a bind, keep in mind that Amazon, Walmart, Target, and CVS are hiring. There’s nothing wrong with working a temporary job to help you over the hump. Think of it as a stopgap, not as a career.
And as much as possible, try to use this unexpected time off to recharge your battery, reconnect with friends and family (even if electronically), reexamine your priorities, and find pleasure in the quiet moments you have alone.