An update on Market Volatility

Further to my recent updates relating to the Coronavirus, you may feel like the sky is falling at the moment. It’s an anxious time, but I wanted to provide some reassurance and perspective.

• We had positioned your portfolio defensively leading into this period of volatility. A focus on preserving capital remains very much top of Fintech’s mind at this time.
• We have been through many instances of this type of market volatility in the past and while the catalyst for a sell off may be different each time, the way that humans respond in these situations is surprisingly consistent. We don’t like the feelings of uncertainty and anxiety, and we are more likely to sell our assets at any price, just to get rid of them so we no longer feel sick in the stomach. This is panic, not rational behaviour. Fintech believes that there is evidence of this irrational behaviour happening right now. When irrational investors reacted to markets overnight, selling was indiscriminate; very little was spared. Such is the panic among some investors at the moment.
• While we don’t know how coronavirus will ultimately unfold, nor what the humanitarian and economic cost will be, the same investment process that Fintech applies for you in any other market conditions, typically works in these types of environments too. There is a high risk of further short term market volatility. However, we remain focused on identifying the long term buying opportunities that invariably arise when markets overshoot on the downside, due to investor fear and panic.
• As one of the world’s most successful investors, Warren Buffet has famously quoted…
  • “Widespread fear is your friend as an investor because it serves up bargain purchases.”
  • “Whether we’re talking about socks or stocks, I like buying quality merchandise when it is marked down.”
  • “We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful.”

Remember that selling out crystallises losses, making them permanent. I encourage you to watch this video from Daniel Needham, Chief Investment Officer at Morningstar WATCH HERE.

As always, please contact our office if you wish to discuss any of the above in relation to your situation.

Thank you,

Grant