March 23rd, 2016
Do not fall into the fear trap.
It’s very easy to do. It’s actually perfectly natural. You see a scary event and the first instinct is to pull back and go into protection mode. But this is a trap. This initial instinct can hurt your long term portfolio and on a grander scale the economy as a whole. There is little doubt that in the next few hours/days we will hear from all major political leaders speaking of solidarity against extremism and in support of our friends in Europe. But since this is an election year we will also hear from candidates and their reps about how this could have been avoided if they were in charge and how we need to take drastic steps to protect ourselves in the future.
Do not fall into this trap
The markets are getting better at taking these terrible events with a much more calm approach. We as investors should follow that lead and not the fear mongering that comes from politicians. The last time we have had the isolationist drum beating this loud was the 20’s/30’s. And that ended really poorly on a lot of levels. The markets are never better by shutting doors. And as investors we need to reject that urge to run for cover when things get scary.
Oil is going to zero, completely a fear overreaction. The people who benefited were the ones who kept a level/logical head and were able to buy in cheap because of the fear.
A few years ago, the markets were going to zero because of financial firms. Again a fear overreaction. And those who were able to see past that reaped the rewards.
There are examples of this as far back as you want to go. Something scary happens, the masses get frightened and overreact negatively, things eventually bottom but most people don’t realize it til long after it happened.
The only difference is now we have politicians overreacting as well. And that can make it easier for people to jump on board. This is a dangerous series of events, one where logic and reason can quickly be overrun by emotions.
Don’t give in to the fear. As investors you need to look past it and see the greater picture and not just the latest headlines. Buy on the fear. (and then close your eyes since it will likely be bumpy)
Steven Dudash – President IHT Wealth