Cashing in on the Coronavirus
Hi Scott,
I’ve been watching (from afar!) the spread of the coronavirus, and I am worried that people are underestimating the long-term financial repercussions if it is not contained soon (and I don’t trust the Chinese government’s figures). Despite this, the Australian share market is up this year, but I am growing increasingly worried. In fact, I am thinking that, with the market now at record highs, it might be time to take some money off the table and wait for a correction before getting back in. What are your thoughts?
Nick
G’day Nick,
First, let me lay my cards on the table:
I don’t know much about the coronavirus.I don’t know whether it will become the next global pandemic that Bill Gates sagely once predicted “could come from China and infect up to 30 million people within six months”.
I don’t know if it will trigger a share market correction.
Traders have already factored into their decisions that the ‘factory of the world’ is effectively shut, that our biggest source of tourists is not delivering at the moment, and that the bushfires have devastated major parts of Australia. Yet that’s all old news.
It’s what happens next that matters to the share market, and, just in case you’re slow on the uptake, I DON’T KNOW ANYTHING.
So, what do I know?I know … that over the past couple of hundred years we’ve endured a lot of bad things: wars, recessions, depressions, pandemics — and through it all the stock market has never failed to hit new highs. Case in point: $1 invested in the share market in 1888 would have grown to $226,560 today.
I know … that it’s impossible to profitably trade in and out of the markets. That’s because if you decide to sell you have to be right twice: first when you sell and second when you eventually buy back in.
I know … that the bulk of your long-term returns will come from dividends, not share price movements. That’s why I focus on the income I receive four times a year and not the value of my portfolio.
Oh, and I also know that I can’t catch the virus from drinking beer. Other people aren’t as sure: since January, Google searches for the phrase ‘Corona beer virus’ rocketed 2,300% globally.
Don’t drink and trade, Nick!
Scott
