The world is watching with concern the spread of the new Coronavirus. The uncertainty is being felt around the globe, and it is unsettling on a human level as well as from the perspective of how investment markets respond. And, as we have seen so many times before, it seems the media is managing to whip everyone up into a frenzy rather than promoting common sense and NHS/WHO directives.
At Veritas, we believe in the fundamental principle that markets are designed to handle uncertainty, processing information in real-time as it becomes available. We see this happening when markets decline sharply, as they have recently, as well as when they rise. Such declines can be distressing to any investor, but they are also a demonstration that the market is functioning as we would expect.
We know it is natural to feel fearful from both a health and investment perspective but we are here to support you if you wish to chat about any concerns you may have, especially if this is your first experience of such market volatility. We also know it is easy for us to say don’t react and don’t do anything and that your emotions can be overwhelming, we do understand.
You are invested in a globally diversified portfolio, matched to your individual risk profile, that has been designed with events like this in mind. Over the long term we know that your portfolio will grow, and temporary market declines are part of the experience. We understand that it can be distressing to see the value of your portfolio fall temporarily, but we are here to remind you not to react and stay calm, as that is what will ensure your long-term investment success. This is a test and it will pass. Just like similar declines that have come and gone in the past.
Past health crises
We can’t tell you exactly when things will turn, or by how much, but we know that those that don’t react at this time will be compensated with positive long-term returns. That has been a lesson of past health crises, such as the Ebola, SARs and swine-flu outbreaks earlier this century, and of past market disruptions, such as the global financial crisis of 2008–2009.
Additionally, history has shown no reliable way to identify a market peak or bottom. These beliefs argue against making market moves based on fear or speculation, even as difficult and traumatic events transpire.
As your financial planners, we are here to ensure that your financial plan stays on track; that it delivers all of your life goals and supports you through life’s transitions. Amid the anxiety surrounding the coronavirus this must remain our focus. Decades of financial science and long-term investing principles still hold strong and they will see us through this storm. Just like they have through every other.
If you have a question about this, please do not hesitate to get in touch. Mindful that contingency plans to work from home for a period of time may be required, may I suggest contact by email or mobile rather than office phone lines.
With kindest regards
Sue Swain – Director
Veritas Independent Financial Advice Ltd