“But I know,
somehow, that only when it is dark enough can you see the stars.”
― Martin Luther King, Jr.
The last few weeks have been tough on everyone, people are self-isolating, prioritising their health and looking after their family first and foremost. People are worried about job security, and if there is an end in sight with Covid-19 pandemic. In fairness to the Irish Government they are taking proactive measures, and hopefully over next few weeks/months we will get through this. Our health is our wealth. As per Leo’s speech in March in years to come we will remember “when things were at their worst… we were at our best”
I was in 2 minds about writing this blog but have received numerous phone calls about what to do next regarding investing. Investing is not the most important thing right now; the wellbeing of our country is. However, I feel it’s important to put it out there to try and provide a bit of calm. As a Financial adviser these are some of the toughest weeks I have experienced. Not only from a personal level, but for customers as you’re trying to build wealth over time, and it’s being eroded very quickly. I remember this feeling back in 2008. Back then I was younger, I was 25, and wasn’t as fearful. I was a financial adviser for 3 years at that point, and I was a lot more confident that the markets would rebound. I also thought it was a great time to buy. Now it’s different, I’m a little bit more fearful, 13 years older, have responsibilities, a child, a wife, a mortgage etc.
Regarding investing there is no magic pill to help investors decide whether to sell now or buy into the stock market. No one knows what will happen with the market. However, I do think we’ll get through this, and I do think the stock market will recover over time.
Here are some good tips from famous investors that have been through a stock market crash before.
- “The only two days that really matter in investing are the day you buy and the day you sell” All the ups and downs in between are simply noise. If you can learn to ignore the noise and stick with your plan, you’ll do just fine.” John Bogle founder and chief executive of the Vanguard Group.
- “Your best bet is to diversify your portfolio across geographic locations, asset class and different currencies” Ray Dalio American Hedge fund manager and co-founder of Bridgewater associates.
- “You shouldn’t let Mr. Market’s views dictate your emotions, or worse, lead you in your investment decisions.” Benjamin Graham known for value investing, and well known for being Warren Buffet’s mentor.
- Invest, don’t trade or speculate. “The stock market is not a casino, but if you move in and out of stocks every time they move a point or two, or if you continually sell short…or deal only in options the market will be your casino. And, like most gamblers, you may lose eventually—or frequently.” John Templeton. Created Templeton growth fund, and one of the best stock pickers of all time.
- Buy Low “Of course, you say, that’s obvious. Well, it may be, but that isn’t the way the market works. When prices are high, a lot of investors are buying a lot of stocks. Prices are low when demand is low. Investors have pulled back; people are discouraged and pessimistic.” John Templeton
- Aggressively Monitor your Investments “Expect and react to change. No bull market is permanent. No bear market is permanent. And there are no stocks that you can buy and forget. The pace of change is too great. Being relaxed, doesn’t mean being complacent” John Templeton
- It’s not always easy to do what’s not popular, but that’s where you make your money. But stocks that look bad to less careful investors and hang on until their real value is recognised. John Neff American Fund Manager and Investor
Here are my own personal views of the stock market and funds in general right now. No one knows what will happen in the future and whether Covid-19 will cause further disruption in the stock market or whether we are close to reaching the bottom, however there are some precautions you can take.
UNDERSTAND WHERE YOU’RE INVESTED AND THE CONTROLS IN PLACE
Make sure you’re aware of where you’re invested and the risk profile that you’re in. Most of the Insurance companies in Ireland have risk-based funds that have volatility parameters within them. The insurance companies are trying to manage the volatility by either adjusting the equity content, moving into cash or other asset classes. Make sure you understand how the volatility is controlled.
IF YOU CAN’T LOSE IT CASH IT IN
If you can’t afford to lose it, you shouldn’t be invested. There is a risk you could lose it all. Always when investing don’t invest what you can’t afford to lose.
UNDERSTAND YOUR TIME HORIZON AND YOUR NEEDS
When do you need the money? How long are you prepared to invest? What growth do you need? Many investors are pension investors are investing for the long term and are investing for a period greater than 5 years, there will be volatility, markets will go up and down. If you’re investing for a short period of time be mindful that your investment has less chance of earning a return, and you may get less than you paid in.
DIVERSIFY, DIVERSIFY, DIVERSIFY
Important to invest in the worldwide stock market. I remember during the recession some of the biggest losers were people who invested in the Irish banks. By investing in several different regions, sectors and companies, you have more chance of earning a return then investing in one area or one stock.
BUILD A FINANCIAL PLAN
By putting a plan together, you know why you’re investing and the risk level you need to take to achieve your goals.
Please note this article doesn’t constitute Professional Financial Advice and does not represent the views of Pure Finance Ltd, these are the personal views of Eoin Wilson. When making any investment decision you should consult with a professional adviser. Pure Finance Ltd is regulated by the Central Bank of Ireland.
If you need a chat I’m available virtually over the next few weeks.