I know there is a highly contagious virus wreaking havoc on the world right now. I know responsible people around the world are working to contain it. I know people are confined to “social distancing”. I know that everyday life is different this week than it was last week. I know there is no toilet paper to be found anywhere.
I know an email about anything aside from wishing others well at times like this can come across as a little insensitive, but I did want to address what this all means for your portfolio, your retirement aspirations, your new homes, your dream vacations, your legacy, and whatever else you’ve been working so hard to achieve.
So here is what I do know:
I know that the value of your investment portfolio is much lower than it was a month ago.
I know that you’re probably not overly pleased about it.
I know that markets prices, in general, are based on people’s perception of value, not on fundamentals (whether it’s a stock price or a roll of toilet paper).
I know that sharp declines in the equity markets like this one are not unique or uncommon.
I know that every downturn is followed by a new market high.
I know that we have a proven and effective framework in place for long-term investing.
I know that we are adequately prepared.
I know what I don’t know (see my last email, titled: “I don’t know”).
The take-home here is the same as my last email (titled: “I don’t know”), which is to ensure you have a framework for long-term investing, and to ensure your emotions (excitement when markets are up, fear when markets are down) don’t cloud your judgment in sticking to that framework.
Any good financial and investment advisor has likely already articulated this framework to you, so if you’re already working with someone and need a refresh on the investing framework in place for you and your portfolio, it’s best to revisit this with your advisor and spend some time understanding how your portfolio is positioned to ensure you’re on track to meet your long-term financial goals and objectives.
The graph below is not intended to downplay what is transpiring, but it does help to put things in perspective:
The take-home is to avoid panic. Avoid the notion of “this time is different” (the 4 most dangerous words in investing). Re-visit your framework, and make sure you’re sticking to it.
Please be careful, be safe and exercise caution.