Although it is terrible for those infected by Corona and their relatives, I think it is important to keep your head cold and try to think and act rationally – even if the stock market has fallen. The fact that the stock market falls is nothing strange and it belongs to the game. Below are some thoughts on both the virus, stock market and the situation.
First and foremost, I would like to point out that I have as little idea as you about what will happen in the future. Even the experts have no idea.
With that clarified, we can start looking at what factors we can control and not. We cannot control the spread of the virus, its effects on the market, the movement of the market or other people’s reactions. However, we can influence our own strategy, our portfolio, our savings and our approach to the situation. We can influence our hand hygiene and have clarified the procedures at home around washing our hands.
That is, you should have chosen a strategy that takes into account market concerns and that it can and will go down. It is not a question of “if” but it is only a matter of “when”. It is sickly tempting to try to time the market, to predict when the stock market will go down and then choose less risk and increase the risk when the market goes up.
Market spending is very, very, very difficult and something that costs the vast majority of money. Even for those who succeed, market timing is not a “low risk, high return” strategy, but rather a “low risk, low return” strategy with long periods of underperformance.
Thus – if it feels difficult with this decline of about -5% in recent days, then it can rather be a feedback that you have been at risk. What I recommend then is to review the overall risk in your savings with the help of eg. Four buckets strategy. Its job is to protect yourself, your everyday economy from the market’s movements by “isolating” the movements into the passive bucket.
To be perfectly honest, if I had not received 20+ emails then I would not have even noticed that the stock exchange/portfolios had gone down. I do not actually follow the stock exchange at that level of detail.
It’s just “business-as-usual”. That’s what will give the best odds over time. Although it doesn’t actually feel that way.
For the interested reader, I can recommend the following two in-depth and geeky articles dealing with the market and the Corona virus:
A little reality check regarding the virus
I really want to emphasize empathy and compassion for the millions of people who are directly or indirectly affected. At the same time, I think it is important to look at it healthy. The media has an amazing ability to play on our fears – especially as fears have a sour cream in our brain – and just this with the Coronavirus triggers ALL the right buttons in our brain to worry.
Seriously, read it. Insights can also be applied in areas other than the Coronavirus. They have another very readable article where a professor of mathematics breaks down the numbers around the virus and shows how they fool us.
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