What does coronavirus mean for investors?

The last week of February was a tough week for markets; the toughest week for a while. The media points to just one culprit which continues to dominate headlines everywhere. Whether browsing on your phone, watching the news or even just catching up with a colleague at the water cooler, the headlines about coronavirus are inescapable.

Volatility

For over ten years now, markets have been positive and volatility has been almost non-existent but for a few dips here and there. We have rarely, if ever, seen a bull market run as long as this and many investors will have forgotten the pain of a sizeable correction. After experiencing good conditions for a prolonged period, it’s easy for a market downturn to feel very scary. We need to remember that whilst the drop we’ve seen in recent weeks is not a comfortable experience, it’s traditionally part of the journey for a long term investment.

Human nature tends to be risk averse and a short term dent in our assets can be a real concern. However, history tells us that attempting to flee a sell-off can lead to crystallising losses at exit followed by missing the right time to re-invest later on.  We also understand how planning, such as holding cash and lower risk holdings within and outside portfolios, allows investors to sit tight and ride out the temporary falls.

Timing

While there’s no doubt the coronavirus will continue to impact markets, that doesn’t necessarily mean long-term investors should be overly concerned. Timing the market is notoriously difficult, even professional investors get it wrong. Trading on news events can often lead to bad outcomes – panic selling often locks in losses, and jumping back into the market is hard to do. Adopting a glass half full approach, a long term investor should be recognising an opportunity to invest more to take advantage of recent falls in asset prices.

Markets will fall but markets will recover. It’s time in the markets rather than timing the markets that will lead to the healthiest return over time.

 


If you have any queries as to how this may affect you, please contact us by email: info@innesreid.co.uk, or on our normal office number: 01244 347 583 during office hours.
 
For further business updates regarding coronavirus, please visit our designated webpage at: www.innesreid.co.uk/coronavirus/
 

 

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