Keep calm and don’t panic
Keep calm and don’t panic is a guest post by financial journalist Adam Lewis
“So, just how bad is this Chinese meltdown going to affect us?” Nope not a headline in the financial press, a text I received from my father at gone 22.00 after he’d been watching the BBC dissecting what has already been term the new “Black Monday”.
Texts about the state of global markets are not common occurrences between myself and my Dad, but given we are both trying to ignore Tottenham Hotspur’s poor start to the football season and the fact he recently retired, he is keeping a much closer eye on financial events these days.
My initial response was one of one of trying to calm him down, telling him the worst thing to do is panic. Yet after such negative reporting it is hard for those who don’t have a professional financial background not to do so. Volatility in markets has been a fairly rare occurrence of late, so Monday’s spike was a shock to all, and global equity markets reacted accordingly.
Yet, while this may affect the thinking of the most short-term investors, in the long-term, unless you truly believe we are on the edge of a global recession, Monday’s falls should not be the trigger for a wholesale changing of an investor’s asset allocation. Indeed, the argument is that it should be just the opposite, with the pullback being an investment opportunity to top up holdings in certain areas for the more savvy.
Stockmarket falls of Monday’s magnitude are always going to grab the headlines, but they can be dangerous because they can make you doubt your investment decisions. I recently wrote an article for FE on what investors should be doing for the accumulation stage of their pension portfolio (not something my Dad is now worrying about). The over-riding consensus was getting time in the market, you have to get in and stay in. (I know that Investment Quorum are firm believers in the ‘keep calm and don’t panic’ strategy as part of their long term financial planning strategy with their private clients).
This does not mean closing your eyes to everything going on around you, but over 20-plus years the rule of thumb is to “pick it and stick it”. For example all those who panic sold during the financial crisis between 2008 and 2011 – when you could not move for negative headlines – all you would have achieved it to crystallise your losses.
It was heartening to read headlines in the trade media, such as “No need for radical action – how investors are responding to the global sell-off” (a story I immediately forwarded on as part of my re-assurance exercise), it would just be even more comforting to see this rationale applied on a national media scale to avoid another wide-scale panic.
However with headlines such as “World stock markets plunge into the red as China’s ‘Black Monday’ wipes hundreds of billions off global indices” and “Are we about to see another global financial collapse?”, I am expecting a lot less football related texts in the coming months …
Adam Lewis is a freelance journalist and content director at Matrix Solutions
He has worked as a financial journalist for over 14 years, the last 10 of which were at Centaur where he lately edited Fund Strategy magazine for 3 years until February 2015. He has won five awards for journalism excellence, including AIC Trade Journalist of the Year (2002 and 2008) and IMA Specialist Reporter of the Year (2005).
Keep calm and don’t panic is a guest post and the views here do not necessarily concur with those of Investment Quorum. In fact, it is very often the case that we may be largely in disagreement but we respect the opinions of others and value their contribution to the wealth management debate. Guest posts may appeal more to some than others and may often have an industry, stock market or sector knowledge expectation.
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