Thought leaders gravitate towards crisis. Many of us out here want to listen. Many up there on stage want to be heard. The big dudes are making regular appearances right now. Heads on the TV. Columns in the newspaper. Extra interviews. The best quotes are hopefully being minted.
No one wants a spooked populace. Someone has to calm us all down, but I have this nagging issue. It’s always a certain segment of people telling the rest of us how to think in a crisis.
Chief Executive.
Chief Economist.
Chief Investment Officer.
Notice anything? Yeah. A lot of chiefs are telling us non chiefs how they should feel about this. I appreciate the wisdom. I accept its sincerity, but they’re far from struggle street. Markets are a formality. Retirement won’t be an issue. Unless they’re the next Bernie Madoff, they’re going to be fine.
Big shots telling me to take a deep breath, don’t panic, stay calm and don’t react? It’s not cutting through. We’re not facing the same problems.
If you’re the average person, I’m more like you. Don’t make big bucks. Pretty good at saving. Believing in the markets to fund my retirement. There is one difference. I’ve seen a little bit more than you. I’ve been investing for about 15 years. Seems like a short period of time. Until I tell you I’ve probably had 12 financial crises during those 15 years. A lot of bad times interspersed with wild euphoria. All personal, self-inflicted bear markets. I’ve exposed myself to more market hell than most can ever imagine. No, I don’t expect any sympathy because I have none for myself.
I’m a slow learner, but lessons have been learned.
This is one of the few crises where I’m relaxed about the outcome. Why? Firstly, I’ve abandoned anything but a rigorous process. Speculation is in the bin. Secondly, I decided how to feel about it before the event even occurred. I didn’t put myself into this situation. I know it’s beyond my control. The firm where I work has a thorough investment philosophy. Every detail that you can control has been accounted for. Its basis is evidence. Data going back centuries, highlighting what is most likely to work over long run periods. It presents myself and every client with the best chance of success there is.
There’s one thing it can’t control – the markets. I can’t blame their current volatility on anyone.
Well, there is that guy that ate the bat.
How I choose to think about markets is up to me. If I buy into someone’s opinion about the short term direction, it will distort my ability to accept I have already accounted for every variable. Direction is a distraction. The “30% down from here” guys might be right. But only in hindsight because crystal balls don’t exist. My portfolio is set with the expectation it could be cut in half. It’s not for everyone, but I understand the possibility. Contributions keep going in. It buys all the way down. And hopefully all the way back up.
I had an automatic investment purchase scheduled for the third week of February. Didn’t alter it. I timed the top. Hard luck, eh? I had another automatic investment purchase scheduled for the third week of March. Didn’t alter it. I timed the bottom. Great luck, eh?
I don’t rue the first one any more than I celebrate the second. The process was correct. The outcome was indeterminable. In 20 years I don’t expect the price of either will matter.
If you have an adviser you already know the possibilities for you. Your portfolio is built for your specifics. Building up. Drawing down. Short term uncertainty is accounted for. If you still have concerns, set aside what the chiefs in the media are saying. Talk to your adviser.
This COVID-19 crisis has seemed somewhat biblical. When you’re stuck in the middle of a crisis, they all do. I know, I’ve seen 12 of them! For some, concern lends itself to great exaggeration. I now lean towards optimism. For me, it’s binary. It either works out, or it doesn’t. There’s nothing to panic about. And if one of those great exaggerations happens, I’d suggest portfolio performance will be the least of our worries. It’s that simple. Thinking this way allowed me to release every other concern.
That doesn’t mean some people won’t have issues ahead.
Investing for a return and not a goal? Issues.
Individual stocks? Issues.
Using a rubbish mortgage product as a proxy for bonds? Big issues.
Levered to the hilt? Massive issues.
If you’ve got evidence forming your investment decisions you’ve avoided multiple landmines. You’re probably going to be fine.
Sincerely,
A Non Chief.
This represents general information only. Before making any financial or investment decisions, I suggest you consult a financial planner to take into account your personal investment objectives, financial situation and individual needs. Don’t make financial or investment decisions on the basis of blog post or sourcing advice from internet forums, if you’d like a introduction to investing, please consider reading Your Investment Philosophy, which offers an evidence based primer for building your own investment philosophy.
