Not only is the market erratically volatile, but other news sounds just as bad.
With the spread of the corona virus causing all sorts of havoc, what to do? Aside from hoarding, that is. And as we know, hoarding can quickly turn into a disorder. Don’t become a Collyer brother.
Market Mayhem
In the face of all the unknowns, the markets have effectively crashed. While there may be wild swings, for the most part things are down. Until there is good news, not much will occur to imbue people with confidence to buy.
Down Is Down
It seems obvious to state, but the reason the market goes down is because more people are selling than buying. As a result, if one sells, especially at a lower price than one bought, one locks in losses. Of course, since we have been in a bull market expansion for ten plus years or so, at least some situations are still profitable, all-be-it if lower than they would have been a month or two ago.
So, Then What?
So what then is a long-term investor to do? Sell or hold on? Stay the course or panic sell, just like what seems everyone else is doing too?
The 2008-9 Financial Crisis
At the time, I did not sell. There were a few times I did buy. Since no one knows where the bottom will be during a decline, it is always a guessing game when to buy. I did not have a crystal ball, so my guess was just a guess.
Since the financial crisis was man-made, I figured sooner or later it would work out. I did not expect a ten-plus year recovery and expansion. On the other hand, when the news was worst, one could wonder if there would be an economy left after all was said and done.
Where I Stand
As previously mentioned, I prefer dividend investing. So my personal investing is geared towards collecting dividends, not buying to later sell. So I was able to avoid the temptation of selling.
In The Mean Time
In the midst of this, companies continue to pay dividends. So while prices are lower, because I generally do dividend reinvesting, I will be buying additional shares at lower prices. At least while dividends continue.
This Time, Is It Different?
Ascribed to Mark Twain: History does not repeat itself, it just rhymes. So will things get worse and then better? Will things get worse and stay that way? Will a miracle cure for corona virus be discovered tomorrow? No one knows. The long shadow of the Great Depression looms over all market declines. In the short run, the Depression was a total disaster. It took a long time to recover. Most other declines where relatively short-lived. What it tells us is that extremes are the enemy of the realistic. (A variant of “the perfect is the enemy of the good.”)
One Day At A Time
So I watch some of the news. I want to know what is going on. But I don’t want to wallow in it. Too much repetition of bad news makes one depressed.
For Me
I have not sold anything since the corona virus hit. Nor do I plan to. It is a different story for the mutual finds I own. They have a mind of their own. Of course, my net worth is down. As mention previously, “The sun will rise and the sun will set regardless of stock prices.” I have cash ready to buy when I feel it is time.
And you? What is your take on the recent decline? Comment here.
The illustration “UVWXYZ All had a large slice and went off to bed” is from a series of prints for children learning to read. Published 1910-19, Courtesy New York Public Library.
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