Obviously, severe market declines are very unsettling. We can't help but fear the worst. And the source of much of the market decline, the corona virus, is equally disturbing.
Here is an excerpt from Chapter 9:
" Over the long-term, the stock market has consistently yielded
positive returns. But we know that, from time to time, the stock
market will decline significantly. Not could decline significantly. Will
not react to them. With Simply Successful Investing, you are in it for
the long haul. Learning to drown out the noise of the markets will
enable you to achieve a far better investing outcome.
The old investment chestnut 'buy low, sell high' may sound easy.
But realistically, in the heat of the moment, our emotions scream
out the exact opposite. Sadly, the lure of quick gains and/or the fear
of missing out compels legions of investors to buy when the noise
is positive and the prices are high. And overwhelming fear compels
many poor souls to sell when they just can't take it anymore, when
prices are at their lowest and all hope seems lost.
Let's go back to 2007; stock markets were hitting all-time highs
and Canadian stock market investors were feeling mighty fine about
the fabulous gains they had experienced over the previous few years.
In the meantime, many savers who had avoided the risk of the stock
market could no longer handle missing out on the action and jumped
in. But by the fall of 2008, stock markets around the world were in
full panic mode as the global financial system seemed on the verge of
collapse, with diminished economic activity and mounting job loss.
Many Canadian investors experienced 30–40 percent declines
in the value of their stock portfolios, and many 'experts' predicted
(hourly and breathlessly) the worst was yet to come. Unable to
withstand the stress and unwilling to risk further 'paper' losses,
thousands of investors crystallized those losses by dumping all their
stocks and mutual funds. A very unfortunate reaction, but totally
understandable.
The fear was palpable and pervasive, but selling
'locked-in' these severe but short-term market losses. Investors sold
their 'businesses,' most of which continued to be very profitable,
at fire sale prices, and were left watching from the sidelines as the
economy recovered, companies once again began to produce record
profits, and stock prices reached record highs. "
Keep calm and carry on.
Larry
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