Don’t trade on the news: coronavirus & your money

Image result for keep calm and carry on

The last couple of weeks have been turbulent market-wise. Fears of the coronavirus and its impact on the Chinese economy sent markets into bear territory worldwide.

My own portfolio lost between 5% to 10% over that period. And I don’t really care. Yes, you’ve read correctly. And, yes, you also guessed that I didn’t sell any of my stocks, and don’t plan to at this stage. Why? because I don’t trade on the news….and you shouldn’t either.

Debunking misleading, false information

A lot has been said and written about this Novel coronavirus or Covid-19. For true and accurate information, I invite you to check the World Health Organization website.

I just want to make the following comments:

  • At the time of writing, the number of cases worldwide sits at just over 93 000. It will most likely increase. That being said, the world’s population sits at just over 7.5 billions. It means only 0.12% of the world population is infected….and 99.88% isn’t.
  • At the time of writing 3 199 people died from Co-vid 19. This will likely increase too. It means about 3.5% of the infected people died…and 96.5% will recover -a lot already have-.
  • Should we be careful and take basic precautions? Definitely.
  • Should we stop living our lives? Definitely not!

Keep calm and carry on, financially

The main economic issue with Co-vid 19 is that it started in China. China is the 2nd largest world economy. It has been at a stand still since January. Of course, it will have a ripple effect worldwide. China manufactures the majority of goods we consume.

It’s way too early to predict a global recession. There are a lot of factors that can trigger a recession. A coronavirus is not necessarily one of them, nor is it the only one.

This is definitely not a reason to sell all your stocks and rush to buy bonds or gold. By doing so, you would probably loose a lot of money.

I previously mentioned this, and I am going to do it again: as long as you’re not actually selling your stocks, you are not losing or making any money.

Bear markets are normal and are to be expected. I’ve also mentioned this before.

A little secret…

The most successful investors are the ones who don’t try to time the market – no one can!- and the ones who actually buy more stocks in a bearish market. The silver lining of a bear market is that stocks tend to become more fairly valued or undervalued.

Because we’ve been in a bull market for so long, a lot of stocks are currently overvalued, i.e. expansive.

What if you can’t keep calm?

If you find yourself in panic-mode over the last financial news, you may want to take an honest, serious look at your risk tolerance. You may also want to review your investment objectives.

In my opinion, holding stocks in a portfolio should reflect a more long-term objective, such as retirement. If you invest in stocks, you shouldn’t need that money for at least 5 years, unless you’re a day trader. If you are, this post is not for you :).

The best way to weather a stormy market is to do nothing drastic or impulsive. Keep in line with your objectives and risk-tolerance.

In other words, keep calm and carry on….

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