“Doubt is not a pleasant condition, but certainty is an absurd one.” – Voltaire
I think the quote above from Voltaire is really apt for the current times. Given the heightened volatility in the market (year to date), one may be forgiven for thinking that markets have never been this volatile. This, as we all know, is a fallacy – think back to the GFC, Y2K, Tech Bubble, the Asian crisis, to name a few uncertain times for the markets. Markets have always been volatile and experience periods of higher volatility triggered by new developments.
It is imperative to remember that markets are designed to factor all available information in and reflect this in the price. When this information is negative and uncertain (as is the case with the COVID-19 Pandemic), the market has processed this information through the demonstrated volatility. The more uncertain and negative the news, the greater the likelihood of a volatile market. But here is the good news – all this volatility means is that markets work, and the market is doing exactly what it is supposed to do.
While knowing that markets work is all well and good, the volatility and the constant media coverage and news make it really hard to keep focused and disciplined to your plan.
So what can you do to stay on course?
Tune out: Make a conscious decision to refrain from giving air time to news and media that is sensationalising the situation and predicting and forecasting what will happen next. As Warren Buffett said, “Forecasts may tell you a great deal about the forecaster; they tell you nothing about the future.”
Watch / Listen: We recently concluded a webinar series that should be a voice of reason above all the noise. The message is consistent and very succinctly surmised by David Butler (Co-CEO of Dimensional Fund Advisors), “Control what you can control.”
Call / Talk: Picking up the phone to your Financial Adviser to discuss any questions or concerns you may have is something I would encourage you to do. The most valued thing your Financial Adviser can provide you with is peace of mind.
I will wrap up with this quote from William Bernstein (Financial Theorist & Neurologist):
“There are two kinds of investors, be they large or small: Those who don’t know where the market is headed and those who don’t know that they don’t know.”
Niyati Khanna (CFP Professional, Chartered Accountant [ICAI], MBA [Finance & Strategy]) is a representative of Alman Partners Pty Ltd, Australian Financial Services Licence No: 222107.
Note: This material is provided for information only. No account has been taken of the objectives, financial situation or needs of any particular person or entity. Accordingly, to the extent that this material may constitute general financial product advice, investors should, before acting on the advice, consider the appropriateness of the advice, having regard to the investor’s objectives, financial situation and needs. This is not an offer or recommendation to buy or sell securities or other financial products, nor a solicitation for deposits or other business, whether directly or indirectly.