Having just made it back from India last week, I have decided to self isolate For myself working from home it can be business as usual. Unfortunately though, we are not in usual times with the rapid escalation of this virus and the wider impact that has caught the vast majority by surprise. It was only last month that market was making new highs and now, a few weeks later, we are in a bear market. To have Wall Street enter a trading halt both on Thursday for having a 10% fall in market value and then on Friday by rising 10% (Wall Street stops trading if a 10% movement happens in one day) which has never been seen before. Interestingly though, the fall made the news headlines but the rise did not.
As of writing, most share markets are down over 20% for this year with the New Zealand market being a little more resilient at around a 15% loss. It is at times like these as investor, it's scary and we are looking for certainty. But as in any other time when investing, there is no such thing as certainty in the real world. No one knows how long this will last, how low markets could go (yes they may and are likely to fall further, but also there is a possibility they won't ) or when they may stage a recovery. Losses like this are normal over the course of a long term investment and I have planned for it.
I know your Portfolio and/or KiwiSaver balance may look a little sick from last month but if you are putting regular funds into them via your contributions/savings or you are planning to invest more, this is actually good news for you as you are now buying investments at much lower prices and the long term expected return has improved for you and that introduced capital.
If you are needing capital soon and/or are drawing upon your portfolio, this is not so good news but there are some strategies we can put in place to combat this. In the planning process I have allowed for market events like this so my clients can keep living the way they planned to over the long term.
Yes I know it is stressful and we now can't even give each other a hug. No matter what I say can totally take away the stress but I will share information when I can that I think maybe useful. Here are three articles that may help with this.
Dimensional FA looks at COVID-19 and the market decline
Sam Stubbs from Simplicity look at doomsday scenarios rarely come to pass
The Irrelevant Investor and should you sell your shares?
Remember if your plan can not handle a 20%+ greater fall in stock value, it was never a plan at all.Back to Insights