Something you thought impossible

Black Swan

We’re still deep in the pandemic, this is 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.

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’, anyone who tells you they do, run for the door, it’s not an untruth, it’s a lie.

I’ve always told you a storm was coming…well, now it’s here. We never leave our car during the blizzard. We wait until it passes. Be patient.

As I’ve said before, I’m invested in the same funds as you have, so my life savings have felt every drop of the decline, I have ‘skin in the game’, it’s painful to see my portfolio decline, but as a student of history and more importantly 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, let’s not compound the issue by making grave financial mistakes with our investments.

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. This is the action reserved for the DIY investor and the financially failed investor.

As Warren Buffett says:

“The stock market is a device for transferring money from the impatient to the patient.”

Successful investors are patient, failed investors are impatient.

If you’re investing every month (which many are) this is a deep temporary market sale, which is good news for your automatic monthly investment premium.

There will 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.
  • a focused desire to becoming financially free sooner (investing more from a younger age).

Second opinion service

If any of your friends, family or colleagues wish to speak to a financial professional at this unprecedented time, please do pass on our details. We have a professional obligation to help as many people as we can to make wise financial decisions.

Keep safe, keep positive and know humanity is a powerful force you don’t wish to vote against.

If you wish to discuss anything please call us, as always, we’re here for you.