“Stay Calm and Carry On”: Some Wise Words Amid the Market Turmoil

As we think about the last couple of weeks in the market, we may be tempted to remember the Chinese curse: “May you live in interesting times.” Without a doubt, the last two weeks have been especially interesting—maybe more interesting than some of us would prefer!

But we also should remember that occasional volatility is part and parcel of the financial markets. As a recent research piece from Dimensional Fund Advisors states, “… markets are designed to handle uncertainty, processing information in real-time as it becomes available. We see this happening when markets decline sharply, as they have recently, as well as when they rise. Such declines can be distressing to any investor, but they are also a demonstration that the market is functioning as we would expect.”

As we go through this period of market uncertainty related to the possible economic effects of COVID-19, it may be a good time to consider some wise words from various analysts, investors, and other perceptive individuals. Here a few gems for your consideration.

“Don’t panic.” —Douglas Adams, The Hitchhiker’s Guide to the Galaxy. As we frequently remind our clients, panicked decisions are almost always wrong. This is true in investing, and in this case, it’s also true with regard to the likely personal health implications of the coronavirus outbreak. As infectious disease specialist Dr. Thomas File says in a March 5 article in USA Today, while we should certainly take reasonable precautions (especially thorough handwashing and use of hand sanitizer, avoidance of touching the face, and staying home when feeling ill), there is really no need to panic. According to the World Health Organization, in 80% of cases, the effects of COVID-19 are mild, and the vast majority of those who are exposed to the virus will recover.

“I’m assuming there will be no apocalypse. And that’s almost always, if not quite always, a good assumption.” —John C. Bogle, founder of Vanguard Group. Sometimes called “the father of index investing,” John “Jack” Bogle revolutionized the investing world by making index-based investing available to the average investor. In a career spanning more than sixty years, Jack witnessed many good and bad markets. His guiding principles for investors were based on common-sense rules that included a belief in the folly of trying to time the market and a strong bias toward buying and holding for the long term.

“[T]he irony of obsessive loss aversion is that our worst fears become realized in our attempts to manage them.” —Daniel Crosby, author of The Behavioral Investor. In other words, if you exit the market to avoid the pain, you’re also quite likely to miss out on portions of the expected gain. Bottom line, market risks come in all shapes and sizes. This includes the financial and economic repercussions of a widespread virus, be it real or virtual. While it’s never fun to hunker down and tolerate risks as they play out, it likely remains your best course of action.

Please let us know if we can help you maintain your investment plan at this time, or judiciously adjust your plan if you feel it no longer reflects your greater financial goals.

Buen Camino!