I was having a little trouble coming up with a blogpost for this month when we got the gift!
Feb 24: Dow down 3%+..foreign markets in freefall, Coronavirus spreading, global economy to shrink…….yadda, yadda, yadda. One number that did get my attention for a moment was that 1 Trillion in market value has been erased in just 2 days. Seen shockers before, and I am sure we’ll see them again.
What should an investor do? Nothing. Plain and Simple.
That answer seems too simple so let’s expand it…..3 Things you should do when Markets get Crazy. Yes, this sounds better.
#1 Watch the reactions of others around you.
This is where you get to see who is really comfortable with their portfolio. I just played golf yesterday with some friends who were all about…….”with yields so low, why does anyone bother with Bonds? I’m 100% in Equities!”
The answer is that long-term investors are ready for a day like Feb. 24. Bond owners are diversified and ready to re-invest should certain asset classes continue to get cheaper. It will take a lot more downside for a re-balance to be warranted, but bonds are the ‘dry powder' needed if you want to buy things when they are cheap.
#2 Be ready for “Doom and Gloom” headlines.
A wise man once stated…..”Price makes News…News does not make Price.” Please re-read if it seems murky, there is a ton of wisdom in there.
Another way to state the same thing is to visualize that that there is a Positive story about why the stock market should go up sitting right beside a Negative story about why the market should go down. The story that gets printed is determined by what the market price does - not vice versa. The news headline is the tail getting wagged by the dog.
#3 Go for a walk.
Honestly, I cannot think of another funny way to say you should be ignoring short-term market gyrations. Stepping back from the news onslaught will help you get a better night’s sleep, and in the long run, that may do you more good then stressing over today’s headlines.
This is being provided for informational purposes only, and should not be construed as a recommendation to buy or sell any specific securities. The views expressed are those of Southern Investment Management Collective (SIMC) and do not necessarily reflect the views of Mutual Advisors, LLC or any of its affiliates. SIMC, nor any of its members, are tax accountants or legal attorneys, and do not provide tax or legal advice. For tax or legal advice, you should consult your tax or legal professional. Investment advisory services offered through Mutual Advisors, LLC DBA Southern Investment Management Collective, a SEC registered investment adviser.
About the Author: Kent Fisher
Kent Fisher is a Chapel Hill, NC Fee-Only Comprehensive Wealth Manager at the Southern Investment Management Collective (SIMC). SIMC provides comprehensive financial planning, retirement planning and investment management services to help clients organize, grow and protect their assets. SIMC serves clients as a fiduciary, and tailors all solutions to each client's unique situation.