Thoughts on stock market volatility

This is a summary of a couple of articles that I read over the weekend. Investors all over the world are worried about the volatility and spread of COVID 19 virus. Here are some sobering thoughts.

The Evidence-based Investor website reminds us that crashes and corrections are a feature of equity investing, but when they happen they can be hugely unsettling. At the time of writing, exchanges around the world have rallied after the worst day for markets for 33 years. But don’t be fooled. We could be in for plenty more stomach-churning volatility in the days and weeks ahead.

The problem is, no one can predict the future with any accuracy. It’s impossible to say quite how serious coronavirus will be, or what impact it will have on the economy, let alone the markets. And markets may rise or fall sharply from here for reasons that have nothing to do with COVID-19. Yes, there’s lots of bad news out there. And there’s bound to be more to come. But life goes on, and there should be rich rewards for investors who keep their long-term focus, diversify, control their costs and carry on investing what they can. Stay calm, wash your hands and don’t touch your face. Or your portfolio

Michael Batnick reminds investors that it is hard to stay calm and ignore the movement day after day and week after week, especially if the market keeps going lower. But, when this thing finally does end, there will be a rally so fast and so furious that it will leave the people who sold like a deer in the headlights. They won’t know what to do. The idea that people who sell out of fear will buy out of greed is misguided at best.

Batnick warns us that if you’re making drastic changes to your retirement fund, just stop. There is too much on the line. What you’re really doing is ensuring you’ll have less money in the future because you’re uncomfortable today. It’s OK to be uncomfortable, in fact, it is guaranteed that over the course of your investing life, you will feel this very same emotion half a dozen times, maybe many more. You can be worried about lower prices tomorrow and still confident in higher returns in the future. That should be the default setting right now.