It Is Time to Consider Being Greedy

With the recent turmoil in the markets, let us take some time to rethink what we need to do. Are you like so many right now, worried about the coronavirus? Are afraid that it will cause the markets to continue to decline? Is the economy strong enough to withstand the possibility of a pandemic? These are all valid concerns, but none are worth changing what you should do concerning your long-term financial plan. While we will not get into the what if’s and what might become of the potential illness, we will examine what we need to do concerning our finances.

First, we need to agree that whatever happens with regards to the coronavirus will happen, and we must rely on various officials to do what they can to keep the public safe. Yes, it is a serious illness that has the potential to affect a sizeable portion of the world’s population. But with some basic understanding of how the virus is spread and how to minimize our exposure to it, we can breathe a little easier. While certain individuals are more prone to contracting the virus, thus far, only 15-20% of the cases are considered serious, with a mortality rate of about 2.9%. These are not exactly good statistics, but they could be a lot worse than they are now. And in time, the medical community will get a hold of the situation and develop a vaccine and a course of treatment to treat those who become ill.

With the world’s economy so interconnected, inevitably, an illness with the potential to disrupt various country’s economies would have a negative impact on the financial markets. I know some will say that it is the virus that is causing the market correction. Some will say it is the upcoming election. And even others will say it is just time as we have been in a non-stop bear market for over a decade. All of these could be correct, or it could be none at all. But with the exception of the virus, the other aspects were already known to the markets and most likely built into the value. The only unknown was the introduction of coronavirus into the equation.

With that being said, now is not the time to panic and sell any of the investments in your portfolio. Yes, the market went down over 10% last week, and it may go down even further in the coming weeks. But as it always does, the market will recover and go back to where it was before the recent selloff. It may not be an immediate recovery, but it will recover. The key is to stay the course and keep investing as if there was no volatility in the markets. Think of it this way; if you sell now, you are selling at low prices and locking in any potential losses and making them permanent. But if you stay true to your investing plan, you are buying more shares with the same amount of money as you were a mere two weeks ago.

It is times like this that make dollar cost average investing so powerful. It is almost like getting a bonus when you are able to purchase more shares for the same amount of money. Then when the markets recover, you will see a noticeable increase in your portfolio’s value. But if you are like many and panic at the recent market volatility, you will be selling at the wrong time, and then chances are you will be buying at the wrong time as well. Now is not the time to sell but rather buy.

As the famous Warren Buffett has stated on numerous occasions, “Be fearful when others are greedy, and be greedy when others are fearful.” That sentiment has served him and the shareholders of Berkshire Hathaway very well over the years. While it may not be the time to be greedy, it is a time that is better to be closer to greedy than being fearful. Now is a buying opportunity and is one that needs to be watched to see if it does become an opportunity to become greedy.

As always, feel free to contact me if you have any questions or concerns. And to join our email newsletter, fill out the form below.

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