Stock markets are battlefields at the moment. You might be panicking about your investments, with good reason, but now is not the time to take drastic action.
One of the financial principles that have been taught over the ages has been the importance of investing in your future in order to accumulate wealth over time. Types of investments vary and can include property, shares, paintings, vintage cars etc. Numerous financial platforms and schemes even accommodate investors who want to only invest in a part verses the whole of the asset, in order to reduce their risk exposure.
Investment gurus always emphasize how critical it is to do your home work prior to investing. As comfortable as you might have been with the decisions you made in the past about your investments, no amount of homework could have prepared many of us on the impact of Covic-19 to our investments let alone the world. The pandemic came unannounced and has left the proverbial blood on the wall of many stock exchange and investment houses.
This has left many investors in a panic as they watch the value of a number of their investments plumble before their very eyes and over a very short space of time. Many are concerned about what this may mean for their retirement funds and what the future may mean. As investors decide on what to do with these investments a number of things need to be considered.
The most important thing to remember is that as long as you don’t sell your assets and disinvest, your losses only exist on paper. However, as soon as you sell and cash in, the money you lose becomes real.
When considering the shares you might have, keep in mind that stock markets go up and down all the time, that’s what they do. But because the long-term trend is always upwards, they create more value than they lose over an extended time period. Even massive market corrections – like the one we are going through now – are temporary. In the long run, markets have proven to be self-correcting value-creators.
You might not feel brave enough to do option 3, but definitely don’t do option 1! The reason Ann recommends option 3, is that she believes you can now get more bang for your investment buck, given how much stock prices have dropped.
Mark Hulbert, an American journalist with MarketWatch, a news platform for all things investing, wrote an article on investment lessons from the 9/11 tragedy that took place in New York, America, September 2001.
Looking at the performance of the Dow Jones, a stock market index measuring the performance of large companies listed on stock exchanges in America, he found that some indices were performing much better than before the attacks within the first two months.
Ned Davis Research, took this form of review a step further by studying 51 major geopolitical crises since the beginning of the last century. It found that the Dow Jones’s average post-crises performance had improved within six months of the respective events. It must be noted that the stock market didn’t always recover quickly in every case. What is clear though is that performance improved significantly in the immediate aftermath of such events.
Mark Hulbert concludes by saying that selling in a panic will likely result in getting the worst possible price for your asset. Act early to manage your exposure before its too late to act.
Whatever you do, don’t sell your investments now. The markets will correct. It is likely to take some time, but we have learned from past experience that they always recover and that investments grow again.
What you should do is take stock of the experience and the lessons learnt. Consider your appetite for risk especially considering your financial goals. Remember that your financial and investment decisions have an impact not only on you and your livelihood but on those that depend on you financially.
This turbulent time can also have a negative impact on your emotional wellbeing. It is therefore important to ensure that you are aware of this impact and manage it appropriately using your support structure.
If history has taught us one thing- and it has taught us a lot- it’s that difficult times do pass. What is of great importance, is to prepare, find the best of our capabilities and resources – for any eventuality.Go back