This past week the markets went crazy. It seems that every time I reviewed my account I lost another $10,000. Yikes. My initial reaction to this was confusion and frustration, is the Corona virus as bad as the markets are reflecting? Surely not! When lift gets crazy I’ve found the best solution is often to calm down, learn from the data and make informed, strategic decisions. This is no exception. First let’s take a look at the chart.
This movement in the SP500 is like rolling back the clock to mid October, and it represents a 11.5% 5 day loss. This means the collective value of all America’s largest 500 companies is down 12%.
Next let’s see if the corona virus is actually as bad as the media says. According to the world health organization the virus has a fatality rate of about 3.4%, this represents about 2900 deaths, most of these deaths have been in china. This is a less than the number of deaths related to car accidents in the US since the outbreak started (about 3600). While tragic, this is no cause for global panic, which means that the market is definitely overreacting.
What to do when the markets go crazy
This overreaction means one simple thing for us long term investors: Stocks are on sale! This is the perfect time to start investing, deploy extra cash, or swap bonds for stocks in your portfolio.
I’ll be investing the spare cash in my brokerage account and also doing my regular every month index fund purchases, then promptly ignoring the market until next month.
I lost a lot of money this week, but that’s ok. I’ll make it back as the market recovers, just like it always has. Here’s a long term view of the market, from this perspective the recent movement looks more normal.
Other Things I’ve Been Doing
Two weeks ago I went to Disney world. I have an obsession with theme parks and there are non better than the Disney parks in Florida. The newest Ride: Rise of the resistance is chaotic and mind-blowing. If you’re a Star Wars fan you need to go and experience this. I also got to pilot Millennium Falcon and went to a space bar.
Disney world has never been better, or more expensive, but this is why I save. Money enables us to do what we love. My wife and I are planning a trip to Disneyland for later this year, but will wait until the crowds get low after the summer.
That’s it for now. Keep investing, keep having fun, and thank me in 10 years when we’re all a lot wealthier.
Stay calm and keep indexing. It’s going to get worse, but it’s also going to get much, much better. Stay strong. pic.twitter.com/yaY4zRA2oo— Wag Free (@wag_free) February 25, 2020