What do your money and the coronavirus have in common?

A recent phone conversation with a client triggered this article, as we were discussing the volatility in markets over the last few months. This was a relatively easy conversation, as this particular client has a very measured view to managing her pension fund and her investments. She doesn’t make rash decisions, she maintains a long-term perspective and doesn’t fret over every movement in the markets.

Our conversation then moved to on to the impact on all our lives of the Covid-19 restrictions – this is a topic coming up in every single conversation we’re having these days! As we chatted through the impact of the Covid-19 pandemic, we came to the conclusion that there are a lot of similarities between the worries caused by money and those caused by the pandemic. Let me explain…

 

It’s very easy to lose perspective

When the markets take a big hit as they did from the middle of February to mid-March, it’s very easy to lose perspective. After all, the S&P500 fell by over 30% in just over a month up to 23rd March. It was very easy to think then that your long-term financial plans were blown to bits. Of course, at that point you didn’t know that there was going to be an immediate and rapid recovery of much of those losses. As at 8th June, the S&P500 had actually recovered to within 5% of its all-time high point! Your plan is decided by your long-term strategy, not what happens over a period of 4 or 5 weeks.

Similarly, when Covid-19 cases started to spread around the world and found their way to Ireland, it was easy to think the end was nigh. While this virus probably still has a long way to run, it’s important to remember that approximately half of one percent of the population of Ireland have been diagnosed with Covid-19 up to the end of May and that the mortality rate is a fraction again of that number. Every death is a tragedy for the families involved, but the overall impact has still been relatively small. Now just like the markets, we’re not predicting the future based on past performance, we’ll leave that to our medical experts.

 

Good behaviours will win the day

I’m always at pains to point this one out in relation to your money. Short-term tactical decisions such as trying to time the markets rarely pay off. You might get lucky from time to time, but more often than not market timing decisions turn into expensive mistakes. Other good behaviour such as having a plan, maintaining a budget and continued saving will help you towards long-term success.

The same applies to the virus. It’s been drilled into us all at this stage about the importance of washing our hands, good cough etiquette, not touching our faces as well as the importance of social distancing. We’ll beat this virus through everyone playing their part and adopting these good behaviours.

 

Be careful who you listen to

This one is so important! If you only went to Twitter for your news, you risk being turned inside out every day, not knowing what to believe. The virus is the end of the world or nothing to worry about. Everyone should be allowed back to work now, or the lockdown is being lifted too quickly. Who do you believe?

This is a regular bugbear of mine. The weekend papers and online media can be an enormous and unnecessary source of angst for investors.I always caution clients against making investment decisions based on what you read. I think it is really important that over a period of time, you identify a small cohort of rational opinions that you really trust for their balanced and non-emotional views. Listen to them and shut out the sensationalist, headline grabbing noise in the background.

By the way, I hope I’m one of your trusted voices…

 

Stick to the plan

We always seem to end up here! That’s because this is so important in relation to your money. Have a long-term plan that will guide you towards your lifestyle objectives and then stick to the plan.

The same applies to you and your family’s approach to staying healthy. Agreeing as a unit to stick together, maintain your good health habits and minimise your risks will help every one of you stay healthy. And then maybe you can start planning how you’re going to celebrate success when you come out of this crisis together, all fit and well. Because that’s the goal.

Stay healthy.

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