Coronavirus Update 17th March 2020
As we all now know following last nights announcements we are now deep in a pandemic, these are extraordinary times and potentially a once in a lifetime public health emergency. In the investing world this is called a ‘Black Swan’, something you thought was impossible, until you see one.
I appreciate everyone’s priority at the moment is the major changes we are currently having to make to our lives and to look after and protect the safety of our family, friends and loved ones. I do also appreciate there will also be concerns over our investments.
Stock markets (humans) have acted as we’d expect, negatively. The stock market is a story, the story changes, the prices change. Now the story is very negative, when the story changes the prices will change again. The stock market overreacts in both directions. This is because the markets feed off two powerful human emotions, that of greed and fear. We don’t know with foresight when the market will ‘turn’, and anyone who tells you they do, run for the door, it’s not an untruth, it’s a lie.
You already have a perfectly diversified portfolio, ideally suited to your long term goals and based on detailed risk profiling. It is built to cope with the deep temporary declines we’re experiencing now.
“We’ve probably known a storm of some sort was coming…well, now it’s here. We never jump ship during a storm. We weather the storm. Please be patient”.
Like you, I also have investments and so my life savings have also felt the recent decline, it’s painful to see our portfolios decline, but as with human nature, knowing that the correct thing to do is ‘do nothing’ will see us all through this. We have enough to deal with through the change and disruption of our lifestyles, and looking out for and protecting our families and loved ones. Let’s not compound the issue by making short term financial mistakes with our investments for the long term.
The nature of risk is that you don’t see it coming. Now for some good news. Going into this crisis we could not have been in a better position economically, a decade plus of prosperity, unemployment at historical lows, businesses with more cash than they’ve ever had and the personal balance sheets of individuals at a high. There’s never a ‘good time’ for a pandemic, but if I could have chosen a point in time, this would likely have been it. We also have a globally connected world and have all the utilities and resources to address this head-on.
When the stock market rises you don’t ‘win’ money, just like when it declines you don’t ‘lose’ money. You only lose money when you commit the worst financial action an investor can make, selling a portfolio in a declining market.
As Warren Buffett says:
“The stock market is a device for transferring money from the impatient to the patient.”
There will also be some good consequences from the crisis, such as:
– conscious spending, do I really need these things/items in my life.
– focusing on what’s important, people to spend your time with, places to go and things to achieve.
Please keep safe and follow the governments advice, keep positive and know humanity is a powerful force you don’t wish to vote against.
If you wish to discuss anything please get in touch with me, as always I will be happy to help. Best wishes
Garry Hale HK Wealth
Some useful links: