The world is gripped by fear about COVID-19. We shouldn’t be surprised. Human beings are finely attuned to what we see as immediate threats. It’s how we evolved. But it isn’t always helpful.
What about the potential impact on your investment portfolio? Well, stock markets fell heavily yesterday, and there’s no shortage of market “experts” in the media warning of further “turmoil” to come.
But the simple fact is that they just don’t know. Yes, coronavirus could develop into a global pandemic. Or it could blow over in a matter of months. In any event, predicting what impact all the different possible eventualities might have on the economy, let alone the financial markets, is nigh on impossible.
Focus on what you can control
A very important principle in investing is to focus on what you can control and let the rest go.
You have no control over coronavirus or the markets. Unless you’re a professor of epidemiology, don’t kid yourself either that you have any unique insight into how the virus might develop. And remember markets could go sharply up or down from where they are now for reasons totally unrelated to COVID-19.
Questions to ask yourself
But, if you’re anxious about the markets — and it’s a natural human reaction to be so — then ask yourself these three questions.
Do you need to get your money out in the next five years? If you do, I suggest you consult a financial adviser, and also ask for a second opinion. They may well advise you to sit tight, but you should seek professional help.
Do you feel very uncomfortable with the level of risk you’re taking? If you do, remember how it feels. Now is a bad time to adjust your portfolio, but if, a few weeks or months from now, markets have returned to their previous levels, you should speak to an adviser.
Has your life situation substantially changed since you put your investment plan in place? If it has, consult an adviser. Again, making major changes to your portfolio during periods of market volatility is best avoided. But your investment plan should reflect your change of circumstances.
If the answer to all three of these questions is “No”, stop worrying! Instead take heart from these words from Jonathan Clements at HumbleDollar:
“If history teaches us anything, it’s that great investment gains go to those who are diversified, optimistic and patient. In other words, if you spread your investment bets widely, favour stocks and have a long time horizon, good things should eventually happen.”
Let the pros do the worrying
Let the financial professionals do the worrying. They’re the ones who have to agonise over how to react. Why? Because they’re judged on short-term performance. You, on the other hand, are free to focus on the long-term future, secure in the knowledge that you’re still on track to achieve your goals.
One final thing. If you’re in any way tempted to reduce the regular investments you make in the stock market, or stop them altogether, don’t. Keep drip-feeding your money into equities. If anything, invest more each month than you currently do. After all, stocks are cheaper now than they were.
Whatever you do, don’t give in to your emotions. Ultimately, it’s not fear that’s rewarded in the equity markets but courage.
Picture: Macau Photo Agency (via Unsplash)
Robin is a journalist and campaigner for positive change in global investing. He runs Regis Media, a niche provider of content marketing for financial advice firms with an evidence-based investment philosophy. He also works as a consultant to other disruptive firms in the investing sector.
