Forward Thinking
Forward Thinking
Issue: May 2020
Disclosures: Bhatia and Mandell report no relevant financial disclosures.
May 22, 2020
4 min read

Protect financial wealth during the COVID-19 crisis

Issue: May 2020
Disclosures: Bhatia and Mandell report no relevant financial disclosures.
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Since our last column, the world has changed more during the course of 1 month than perhaps at any point in our lifetimes. The SARS-CoV-2 virus, once an obscure Asiatic pathogen, has rapidly morphed into the COVID-19 pandemic, which has affected lives, jobs, world economies and equity wealth at a historically efficient pace. Many orthopedic surgeons have seen their surgical livelihoods upended as elective surgical procedures have been suspended indefinitely. In many cases, surgeons have had to take reductions in pay as they try to keep staff and practices afloat while enduring an indefinite time without revenue. Although monetary woes will, and should always, take a backseat to health matters for you and your family, it cannot be overstated how crucial financial stability is to your family’s well-being. In this month’s column, we focus on five steps that can be taken now to protect your financial health during this tumultuous time.

Protect your, your family’s health

Although this column is focused on protecting assets, the most important asset of all is human life. It goes without saying that, during this global health pandemic, it is imperative to make decisions that prioritize your and your family’s health above all else. This includes having a logistical and financial plan in the event you or a member of your family becomes ill. When the pandemic passes, the added preparedness can be transitioned to estate planning decision-making for you and your family.

Protect your liquidity

Sanjeev Bhatia, MD
Sanjeev Bhatia
David B. Mandell, JD, MBA
David B. Mandell

In previous columns, we recommended maintaining a 3- to 6-month supply of cash and cash equivalents to fund living expenses in the event of calamity, job loss or hardship. During current times, the value of this practice truly begins to stand out. If personal liquidity is a concern, put all non-urgent expenses temporarily on hold, such as credit card autopay, subscriptions, dues and other non-urgent payments. Also, because the federal government has delayed all student loan interest during the COVID-19 national emergency, you may also defer student loan payments for several months without incurring increased capitalized interest.

Connect with financial quarterbacks

Whether you are close with your trusted and longstanding qualified financial advisor or a group of financial professionals, it helps to communicate effectively with your personal financial quarterback(s) during tumultuous financial periods. Human behavior in market downturns may be characterized by irrational decisions that could drastically alter your net worth outlook years later. It is likely your financial advisor or quarterback risk-adjusted your personal investing strategy to account for large market downturns, like the one experienced in March. In other words, investors nearing retirement likely were protected from large market downturns by having lower volatility assets whereas younger investors were perhaps positioned so that they weather the storm and take advantage of lower equity prices for long-term gains.

Do not stop investing

Few people have a better track record in which they come out ahead during epic market downturns than legendary investor Warren Buffett. Buffett famously said at Berkshire Hathaway’s Annual Investor conference that “our favorite holding period is forever” and “the stock market is manic depressive.” When managing your personal stock portfolio, keep in mind that timing the market upswings and downswings is a highly risky strategy that risks sacrificing your long-term upside. In a recent analysis involving market data going back to 1930, Bank of America found that if an investor missed the 10 best days of the Standard & Poor’s 500 in each decade, the investor’s total returns would be 91% as opposed to 14,962% for investors who held steady through the troughs. Think of your investments as long-term partnerships, just as Buffett does, and tune out the day-to-day noise. Additionally, consider investing additional capital as appropriate as part of your long-term plans. Sharp market downturns, like the one in March, generally produce tremendous sales on high-quality stocks of companies. When stock searching, look for companies with fortress balance sheets, large cash reserves and unshakeable secular growth prospects. Companies like these only get stronger during negative sentiment market events. As mentioned in our other articles, a wonderful company that is valued fairly will continue to be a wonderful investment for years to come. In other words, identifying investments that have built-in advantages or “moats” allows you to reap handsome rewards in the long term.


Optimize overall financial picture

Finally, if you are like many orthopedic surgeons, your schedule is suddenly lighter than usual. Use some of your extra time to shore up other areas of your financial well-being, including optimizing your disability coverage and asset protection, strengthening your practice’s health and reassessing your family’s spending habits.

The COVID-19 crisis has led to unprecedented economic bloodshed at the most rapid pace most of us have seen in our lifetimes. As of press time, there is no end in sight to the human and financial loss expected in the weeks and months ahead. Despite the negative outlook being portrayed daily, keep in mind that humankind has a long history of overcoming grave challenges that involve global disease. The Italian Renaissance, which is perhaps the greatest cultural, technological and economic revolution in human history, emerged after the Black Death, and many historians say Bubonic plague sowed the seeds that made the Renaissance possible. During these hard times, focus on the health of your family and loved ones. Economically, we will survive. Following the steps outlined herein, you can keep your family’s financial future safe, regardless of how long the pandemic lasts.

Disclosures: Bhatia and Mandell report no relevant financial disclosures.