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Take Courage

Robin Powell  |  March 2, 2020

MY LAST JOB in mainstream journalism was in 24-hour TV news. When a big story broke, we dropped everything. The viewers, we were told, were only interested in one story. Today that story is COVID-19, better known as the coronavirus. Next week—perhaps even tomorrow—it could be something completely different.

Human beings are finely attuned to what we see as immediate threats. It’s how we evolved. But it isn’t always helpful. The reality: The chances of any of us catching the coronavirus, let alone dying as a result, are extremely small. To be sure, we should take precautions and avoid unnecessary risks. But worrying about the coronavirus is a waste of time and energy.

What about the impact on our investment portfolios? Stock markets fell heavily last week, and there’s no shortage of market “experts” warning of further “turmoil” to come. But the simple fact is, they just don’t know. Yes, coronavirus could develop into a global pandemic. Or it could blow over in a matter of months. Predicting what impact all this might have on the economy and the financial markets is all but impossible.

So what should we do? An important principle in investing is to focus on what we can control and let the rest go. You have no control over the coronavirus or the markets. Unless you’re a professor of epidemiology, don’t kid yourself that you have any unique insight into how the virus might develop. Moreover, from here, markets could go sharply up or down for reasons totally unrelated to COVID-19.

All that said, if you’re anxious about the markets—which is an entirely natural reaction—try asking yourself three questions. First, will you need money from your stock portfolio in the next five years? Second, do you feel very uncomfortable with the level of risk you’re taking? Third, has your life situation changed substantially since you put your investment plan in place?

If the answer to all three questions is “no,” stop worrying.

What if you answered “yes” to one or more questions? Making major changes to your portfolio during periods of market volatility is best avoided. But your portfolio should reflect your upcoming need for cash, how much risk you’re comfortable taking and any major changes in your life’s circumstances. Take the time to think about what sort of portfolio you ought to be holding, and then—either on your own or working with an advisor—figure out how best to make the investment changes you need.

One final comment: If you’re tempted to reduce your regular investments in the stock market—or to stop them altogether—don’t. Keep drip-feeding your money into stocks. If anything, invest more each month than you currently do. After all, stocks are cheaper now than they were. It isn’t fear that’s rewarded in the stock market, but courage.

Robin Powell is an award-winning journalist. He’s a campaigner for positive change in global investing, advocating for better investor education and greater transparency. Robin is the editor of The Evidence-Based Investor, which is where a version of this article first appeared. His previous articles for HumbleDollar include Why We TryGood for You and Better Than TimingFollow Robin on Twitter @RobinJPowell.

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R Quinn
R Quinn
1 year ago

Sage advice that is too often ignored. I managed 401k plans for over thirty years and communicated with employees endlessly, even held financial planning meetings and in the end it never seemed to make a difference in the way people managed (or not) their money.

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