With the recent hysteria surrounding the corona virus, I felt compelled to add my voice to the fray. Let’s wax philosophical for a moment. ‘We have been here before and we shall be here again.’ Some of you may recall the mid October 2018 correction, when the TSX dropped from its high of 16,204 to it’s low point of 13,780 Dec 24th, 2018, before its rapid rise for the entirety of 2019. You read that correctly, ‘the entirety of 2019!!‘ I’m not even including reinvested dividends during the entire upswing. As I write this the TSX sits at a comfortable 16,263 Feb 28, 2020.
I believe the severity of this sell-off has primarily been caused by panic more than any long-term structural impairment. When evaluating the current market environment however, rational thinking should be applied, keep emotions out of it. The more emotional you get, you allow panic and disordered thoughts to take over, the more prone you will be to making errors in judgment regarding your portfolio.
This is a buying opportunity. Keep investing, this is not the time to switch or make any adjustments to the long term portfolio. Long term, is often tossed around and viewed as a year-to-year analysis of the current market condition. Long term means; just that, LONG TERM! Ten to twenty year time horizon. Not six months, not one year or two. In other words, add to your portfolio, keep adding, keep buying low as the fire sale continues hopefully long enough to get as many people on board before the rebound!
About that Mid October 2018 market correction I talked about at the beginning of this post, most people don’t even remember it. That’s the beauty of market cycles and the human mind in general. We always forget and move on until the next crisis. Do yourselves a favor and replace the word crisis with opportunity, your investments and future retired self will thank you for it.
10 things to remember when volatility strikes:
- Volatility is a normal part of long-term investing
- Long-term investors are usually rewarded for taking equity risk
- Market corrections can create attractive opportunities
- Avoid stopping and starting investments
- The benefits of regular investing tend to stack up
- Diversification of investments helps to smooth returns
- A focus on income generation (dividends) increases total returns
- Investing consistently delivers in the long run
- Don’t be swayed by sweeping sentiment
- Active investment can offer benefits in periods of increased volatility
