Time for recuperation...
I assumed I was “Covid proof” until it caught up with me. Thankfully like many who have caught it recently, apart from a couple of days feeling rotten, I got over it and was back working after a few days although I got tired quite easily for a couple of weeks afterwards. Thankfully I am showing no signs of long-Covid, but if I had I would have just had to be patient and wait until my body recovered.
However, it got me thinking about our health and how if we are unfortunate enough to suffer temporary illness, time is as much a healer as anything else. A footballer who suffers an ACL injury knows it will be nine months before they will be able to play again, and trying to come back too quickly will likely only prolong the time out. It is obviously frustrating but they know that in time they will be better.
I think it is wise to have the same mind set when it comes to investing.
In human terms money can be quite a poorly creature being prone to periods of ‘illness’ fairly regularly. If we regard being in a bear market (a fall of 20% or more) as a time when it is ill, since the start of the Great Depression money has been poorly nearly 20% of the time. By that I mean that if you invested over a fifty year period, on average, for ten of those years you would have had to put up with seeing it go down, and when it does it can do so quite rapidly.
Experienced investors realise periods such as this is the price to pay for the long term benefits of investing in the stockmarket. However, for newer investors it can be very worrying. I compare it to new parents calling the doctor at the slightest temperature rise in their first child whereas by the time the third child comes along they casually pour Calpol down the ailing child’s throat without a second thought.
When it comes to money time is, more often than not, the only healer. Trying to be too smart and time markets has never ended well and can result in the ‘patient’ being permanently weakened. Although it is natural to feel you should be doing something as your pennies lie sickly in your wallet, in my experience, making too many changes is not a great idea. The market moves very rapidly during these periods and what looks sensible one week can look foolish the next.
Our advice during periods like this, thinking along the lines of the injured athlete, is let it rest and give it time to get back on its feet. Financial convalescence if you will. The only difference is when it comes to money no one knows when the recovery will commence, only that it will at some point.
As you will be aware, money is feeling quite poorly just now. Having been in rude health six months ago it has gone downhill quite rapidly being attacked by inflation, wars, industrial unrest, supply chain issues etc. There has been no safe haven as even holding cash on deposit has lost money in real terms.
To make matters worse the drugs being administered by central banks in the form of increasing interest rates to quell inflation are the equivalent of giving chemo to a cancer patient. There may well be long term benefits but it can feel terrible in the short term.
In my experience just when you start wondering if the illness will be chronic, money perks up quite dramatically often when you least expect. It almost makes you wonder if it is a hypochondriac and there was nothing wrong with it all along. This is why timing markets is a fool’s game. No doubt this time will be no different.
But even experienced investors need some help to get through periods like this unscathed and I suggest that anyone that finds themselves struggling should avoid the news as this has proven to reduce the symptoms and the odd dose of adult Calpol, or alcohol as some of you may know it better, can sometimes help as well.