Should We Worry About The Coronavirus?

CoronavirusWell, it looks like investors are finally taking the coronavirus seriously. The stock market plunged this week and turned negative for the year. I was wondering when this was going to happen. Just a week ago, investors were ignoring the coronavirus and the stock market was going up. I’ve been following the news closely and I was surprised how well the stock market was performing this year. On February 26, there were over 82,000 confirmed cases. The number of infected was probably much higher than that because many people had mild or no symptoms. There had to be well over 100,000 cases already. How can you contain that many cases? Anyway, this week we see the Coronavirus spreading in Italy, Iran, and South Korea. Finally, investors got spooked and sold off some investments.

Long term investors shouldn’t worry too much

As a long term investor, I’m not too worried about the coronavirus. The global economy will take a hit in the short term, but it should come back in the long run. This is a good opportunity for long term investors to average in. I’m not going to make any big moves because we don’t know how deep this drop is going to be. I’ll stick to the plan and keep investing in our 401k and Roth IRA. We don’t plan to start withdrawing from our retirement plan for over 10 years. The coronavirus will be a small blip in that kind of timeframe. If the stock market drops over 10%, then I’d consider moving some money into stock.

However, if you have a large expense soon, you will need to think about building some cash position now. Don’t wait too long to sell if you’ll need cash.

Personally affected

On the personal side, I’m somewhat worried, but I’m not overly stressed out about it. IMO, the cat is out of the bag. There are too many cases in too many countries now. The coronavirus probably will spread all over the world at some point.

The number of cases might drop once the weather warms up, but it’ll be back. I’m assuming the coronavirus is very similar to the flu virus. It’ll mostly disappear in the summer and come back in the fall. Hopefully, the US can contain the virus until May then come up with an effective vaccine for next season.

A vaccine would help a lot because the fatality rate of the coronavirus seems to be higher than the flu. The flu has about a 0.1% fatality rate. The coronavirus’s fatality rate is 20 times that. The death toll will be massive if we don’t have a good way to treat/prevent it. Let’s look at an early study for some indications.

Age

The preliminary data shows that the fatality rate is higher in certain segments of the confirmed cases.

  • No death in young kids, 9 years and younger.
  • 8% fatality rate for 70 to 79 years old.
  • 15% fatality rate for those 80 years and older.

We’re still young and relatively healthy so we’ll probably be okay even if we catch the coronavirus. Also, it doesn’t seem to affect kids the same way as adults. There were only about 1,000 cases of infected children out of 72,000 cases. There are probably many more infected children, but they probably don’t have any symptoms. Whew! I’m glad we don’t have to worry too much about our son. The kids at school are always a bit sick. The germs keep go round and round.

Preexisting conditions

The fatality rate is also much higher for people with preexisting conditions.

  • 5% for people with cardiovascular disease
  • 3% for diabetes
  • 3% for chronic respiratory disease
  • 6% for hypertension
  • 6% for cancer
  • Overall fatality rate estimated at 2.3%

In conclusion, you have a much better chance of surviving if you’re young and healthy.

Consumption drops

For now, the coronavirus isn’t changing our lives much. We don’t have a case in Oregon and people are still spending money like normal. However, I’ll probably cancel our trip to Thailand this summer. I was planning to visit my parents for 4 weeks and stop by Korea for a quick visit. That sounds like a bad idea with the coronavirus spreading around the world.

South Korea has over 1,500 cases and the number is climbing fast. Visiting Korea is a risk we don’t need to take. Thailand has fewer cases (40), but I just saw a worrisome report. One student near Bangkok caught the coronavirus and went to school before it was detected. It could blow up in Thailand too. The kid’s grandfather just came back from Japan.

Luckily, I didn’t book anything yet. I’ll keep a close eye on the news. If the coronavirus disappears and the tickets are super cheap, we might go. Otherwise, we’ll stay close to home this summer. I’m sure many consumers are thinking this way. The travel industry is going to take a while to recover from the coronavirus. Who wants to go on a cruise after hearing about the nightmare on the Diamond Princess coronavirus cruise ship? Not us.

Keep up with the coronavirus news

Here are some good sites for keeping up with the news.

What about you? Is the coronavirus affecting your life? Are you making any changes to your investment strategy? Is it time to buy some cruise liner stocks?

Image credit: Lucrezia Carnelos

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Joe started Retire by 40 in 2010 to figure out how to retire early. He spent 16 years working in computer design and enjoyed the technical work immensely. However, the job became too stressful and Joe retired from his engineering career to become a stay-at-home dad/blogger at 38. Today, he blogs about financial independence, early retirement, investing, and living a frugal lifestyle.

Passive income is the key to early retirement. This year, Joe is increasing his investment in real estate with CrowdStreet. He can invest in projects across the U.S. and diversify his real estate portfolio. There are many interesting projects available so sign up and check them out.

Joe also highly recommends Personal Capital for DIY investors. He logs on to Personal Capital almost daily to check his cash flow and net worth. They have many useful tools that will help DIY investors analyze their portfolio and plan for retirement.

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