We’re in the midst of a Health War.
A unique war, with every country in the world united in an effort to beat the same enemy.
A silent, invisible, deadly enemy.
It’s encouraging that China has curtailed the virus with very few new cases.
This is a crisis that no one alive has faced, certainly not at this scale, but we will get through it.
These are the words of Andy Hart- from Maven Adviser in the UK.
He goes on to tell ...
Two frogs fell into a milk bowl that they were dancing on top of.
Both swim around but soon realise the edge of the bowl is too high for them to ever get out.
Frog One panics and thrashes about saying “we’ll never get out, we’ll never get out!” until the frog drowns.
Frog Two thinks “I must keep calm, there must be a solution.”
The frog slowly swims round and round thinking for hours, until the frog notices that the milk has turned into a pat of butter.
This allows the frog to jump out.
Hart goes on to explain that through this Health War people will suffer, be it losing a loved one, facing a business closure, a loss of earnings, and major disruption to their lives and jobs.
He suggests from a financial perspective our order of concern should be:
- Personal liquidity. Will I have enough money to see me and my family through and will my business/job/career survive? What immediate actions do I need to take and take now?
- Invested capital. Your investments/pensions etc.
These are invested in a historically appropriate portfolio designed with these events in mind, so if you have no reason to sell for personal liquidity reasons, the action to take is to ‘do nothing’.
As counterintuitive as it sounds it is for most the correct cause of action.
- The wider economy, which usually reacts later than the stock market.
It’s clear we’re effectively in a recession even though it’s not ‘official’ yet. Recessions are part of the business cycle, painful but nothing unexpected.
Hart goes on to explain that at this critical juncture your decision is binary (one or the other).
- You believe we will see this health crisis off and humanity will get back to where we were, or
- You believe we will not get through this.
If your answer was dictated by the headlines you may think the latter, if it was dictated by history you would be all in on the former.
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The two emotions that collide here are fear vs faith in the future.
Hart explains that personally, he's not betting against humanity. It’s a powerful force.
The investment decisions you make in the near future will impact the rest of your life.
The stock market is there to test you. The current crisis may be the greatest test you’ve faced.
Remember, the stock market is a collection of the greatest businesses on the planet.
We regularly lose a few businesses but human ingenuity also means we gain new ones. Capitalism is a success story.
Looking at the prices of the stock market day by day will fill you with anxiety.
The less you look the better you’ll do, but more importantly the better you’ll feel. If you’re looking at your portfolio daily, you’re not a long term investor, you’re a short term trader.
Studying previous global stock market crashes it’s a recurring theme that when the story and noise are at its peak, things are usually about to change.
Staying disciplined during a time like this can feel like you have your hand on a burning stove when all you want to do is pull it off.
Beware of the person who claims to know when this will end.
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