The five most powerful tools to help investors in a crisis
Posted by Adrian Lowcock in Press releases category on 27 Mar 20
Crisis are always different, they have a different effect on the economy and indeed stockmarkets. It is because of this that we often feel like this time is different to previous crisis. Of course, there is a huge difference between the Global Financial Crisis and the Coronavirus (COVID-19) crisis. However, whilst the impact is very different, the result is often very similar - fear and panic. Both of which are having the same effect on investors as they did during any other crisis.
The question is what can you do about. We cannot control much in our lives at the moment but we can control how we behave as investors and we have some powerful tools to help us do so.
Time - Time is often seen as the most powerful tool. The more time you have the better. If you don’t need the money now and can wait a few years, or even longer, then you are in the best place. Just as “time heals all wounds” it also can help recover any loses you might have in your portfolio. Market falls, such as that we are seeing today, are part and parcel of investing, but in time, we expect markets to recover.
Patience - Great investors need patience and need to be able to resist the urge to do something. In times of crisis many investors panic, they succumb to their fears and decide to act on their emotions. It takes a lot to resist this, especially as the evidence all points to things getting worse before they get better. But if you have patience you can avoid selling at the worst possible moment and realise your losses.
Perspective – It is human nature to focus on what is immediately in front of us and over-emphasize its importance. Of course, the coronavirus (COVID-19) crisis is significant and should not be underestimated. However, the threat will pass and companies will survive, the economy will begin to recover and people will adjust. The ability for people and companies to adapt is often underestimated.
Discipline – It is more important than ever to stick to your investment principles and follow your investment selection process. Whilst these should be reviewed and tweaked if they can be improved it is not a good idea to abandon your process in stressful times. The best fund managers lean even harder on their process and it is this that will see them and their investors through the crisis.
Switch-off – Once you have made your choices and investment decisions and have set your plan in motion, then the best thing you can do is switch-off. You cannot control the markets and watching it swing so violently is only likely to be depressing and could lead you to make bad decisions. If you have individual shares it is worth checking if there are any announcements relating to the business.