There was a major selloff in the stock market this week as investors processed information about the coronavirus. As we discussed these events, Austin and I inadvertently found ourselves talking in terms of what we thought could happen next. It’s a natural reaction to uncertainty for us to try and predict the future. But when it comes to the stock market, we should refrain from this very human tendency.
Philosophising on the logical and probable outcomes of any global crisis, event, or situation does us no good. The market moves on unexpected outcomes, not the expected. Expected events are already taken into account and priced into the market, therefore trying to trade on that information is useless.
Therefore; I think it’s best to accept that we don’t know what’s going to happen, and be totally okay and content in this lack of knowledge. These are situations that we do not have control of, therefore we need to make sure our investment portfolios are always ready.
We invest other people’s money professionally and have been doing so for many years. Friends and clients comment from time to time that “being responsible for other people’s life savings must be very stressful”. It certainly can be stressful, but we have learned important investing lessons that significantly alleviate most of the stress. Every day, at the end of the trading day, we want all of our client’s portfolios to be prepared for anything, to the level they are comfortable.
Regardless if the market takes off, or has a tough sell off, investors should only participate to the level they can handle. Investment portfolios should be built around this truth so you are always ready for what tomorrow has to offer. We rarely have any idea what tomorrow will bring, nor can we spend all of our time worrying about it. Rather, we just remain vigilant and prepared.
Bottom line? Your investments should be prepared for something like a potential global pandemic well before it ever has a name. If you would like to discuss ways we can better prepare you for the future, contact us today!
