Fear and Loathing

(With special thanks to Grahame Arnould for his contribution, above)

There has been no shortage of opinions bandied about in the media this week both in the regular news and on the social sites.

Financial markets are obviously undergoing severe volatility, likely exacerbated by computer generated algorithmic trading activity and perpetuating the fear factor. 

I will leave you readers to your own determination of the quality of the political leadership on display.

If your financial advisor has been in touch, I am certain that their words have been soothing, panic should be completely discouraged. I have seen some of the written advice, everything from "don't look at your statements" to the classic reminder that you need to remember that "you are in this for the long haul".

If you are in a fully invested "buy and hold", one size fits all style of portfolio, you have little choice other than to ride the waves of the storm and hope that it blows itself out without wreaking too much havoc, both financially and emotionally. It is never an easy prospect to gamble your future on hope.

Basically, at this point in time, your balanced, globally diversified portfolio is likely not a whole lot different than it was at the beginning of 2018 (unless you are more invested in bonds than equities):

Some might use preferred shares for their balance (gold line above), but that has not likely been working well of late.

An individually tailored portfolio has the benefit of taking into consideration your personal timelines (i.e. when you might need to rely more on your on portfolio for your lifestyle expenses) and your personal risk tolerances.

As well, if your portfolio is being re-balanced regularly, it leaves it less vulnerable. 

Even further, portfolio management (vs. a buy and hold strategy) may be able to reduce the enormous impact of the volatile times and leave opportunity to find value when it appears in times of financial market duress.

The basic tenets of long-term planning and tailored and appropriate investment strategy are important tools in minimizing downside risk so as to be able to limit the portfolios recovery time when the distress abates.

From what we have been able to ascertain from medical experts, the Coronavirus (Covid-19) is eventually going to touch the majority of us. It is the uncertainty created and the loss of economic confidence (consumers and businesses postpone spending and investing plans) both from a supply and demand perspective that is going to hamper economic growth and very likely create a recession. A vaccine is not expected for at least 18 months.

Central banks can only do so much, but they certainly cannot create economic demand with lower interest rates but they can create false and dangerously over-priced assets that have proven to be problematic as investors try to find what real value actually is.

Corporate earnings estimates are being revised significantly lower over the next year, adding greater uncertainty to current valuations.

The near future could be somewhat trying on many levels, however changing your goals or worse, drastically altering your financial plan in panic, may end up in disaster. 

It is time to take stock of your situation, create and /or update your plan and make the minor adjustments necessary, but always keep the long-term goals at the forefront.

Most importantly, don't let the hype (cheerleaders and doomsayers) force you to make any major changes. If you feel tempted, seek out good, solid advice / coaching to assist you in any decision making process.

At High Rock, where we believe in disciplined investing, we are always standing by.