Good afternoon all, I thought it would be the right time to drop a note out about the recent Coronavirus scare and the affect on markets and investment portfolios.
The first point is that the stock market correction and the move of funds into Bonds is a very normal and expected event. The volatility we have in the portfolios, is one of the costs we have for having expected higher returns in the long run.
Generally, every newsletter and email we send out expresses the view that these funds do go up and down and this time is no different.
Clearly, we are in a time of financial volatility with Coronavirus the current predicament, and I am sure you will all have your own opinions on this after some blanket media coverage. Yet, if you go online and check your balances, as of today, they are relatively flat since the start of the year, not much change to see at all. Yet what about the future months? Will we see a continuance downward in the stock markets? The answer to this question is, we simply do not know.
Is this a time to invest more funds (should you have them) to enjoy a bounce back? Or is it time to be more cautious as we move into a plague filled Zombie state? Again, we simply cannot say.
The investment process we have is a rather dull play of the long-term trend, which has historically always been up, if we give markets long enough to recover.
Summing this up is Mr Warren Buffet in an interview last week, it’s a long interview which you can watch by clicking the link below, the first few minutes is the relevant section.
He didn’t know too much about Coronavirus but said it wouldn’t make too much difference in the long term. If you buy a farm or a Company, you buy on the value proposition and short-term issues won’t affect that. He also reiterates that he has never met anyone who can predict where stocks will be in the short term.
We are not in the same situation as Mr Buffet who has been buying stocks every year since he was 12. Some of us are decumulating our nest eggs to assist in funding retirement, others are in the accumulation phase.
Also, we all have varying degrees of tolerance to the up’s and downs of the diversified portfolios. Those that can stomach larger swings in the fund can be more Growth orientated, those that cannot afford to see portfolio values drop significantly or are in the position where they do not need to take additional risk, can be more conservative.
Like most corrections, the aggressive funds get hit harder than the Conservative counterparts, yet when the fear subsides, the aggressive funds will race up quicker. If only I was clever enough to predict when that moment will be.
The more I learn about financial markets since my first job in the City of London delivering checks by messenger at age 16, the more I know that the short term is opaque, yet the long term is upwards.
Happy to chat further or review how your plans are evolving.