Global fears in recent months have been very short lived – such as the conflict between USA and Iran and now what we know as the Corona virus outbreak. As we mention time and time again, what makes a successful investor is their ability to hold through troughs and furthermore buy when the markets are down. It all comes down to Warren Buffet’s quote that it is wise to be “Fearful when others are greedy and greedy when others are fearful”. This can be directly related to the current state of global markets, constant fear affecting investors decisions.
Another market overreaction?
The current state of the Corona-virus is ongoing, so we cannot predict the total outcome of the virus. However, looking back on history we can determine how we have handled cases like this before.
- Past contagious breakouts have been controlled – breakouts such as the 2003 SARS epidemic as well as the Ebola scare have all been controlled with strict procedures and quarantine laws.
- Breakout located in a Chinese city of 60 million – compared to China’s total population of 1.4 billion.
- Economy will only be affected in the short term, as procedures are in place to minimise the short term danger of the virus.
- Social media inflating the situation with an undertone of fear.
Let’s talk opportunities
In the past week, US 10 year bonds fell 8%, a telltale sign of global speculation as news of the virus becoming worse spread through social media. Many investors have seen red losses in their portfolio this week as the market tumbles from a record high early January. In behavioural economics, as people begin to feel the losses they begin to sell off their ownership to avert a further loss. This is called loss aversion. Loss aversion plays a huge role in creating more fear and driving the markets and economy into the ground. As a long term investor, you will experience both short term losses and gains however you will aim to be less emotionally attatched from your stock and therefore systematic risk like a virus spreading should not be a huge factor. Developing this attribute as a young investor in my opinion, is one of the most important aspects of becoming a new,succesful investor.
Possible ASX Opportunities
Before I start, I am obliged to remind our viewers that this is not advice only general commentary from my extensive research in this area.
- Stocks that have moved with the market, usually low beta blue chips. It may provide nice entry points, however your own research is essential.
- ASX stocks with earning reports coming up- the ASX fall may have impacted these companies prices and an entry now would allow a good entry. If this company posts positive financial such as Macquarie Group, you will make a nice short term profit.
- Australian Travel sectors have been hit- Qantas Ltd and Sydney Airport have both felt -5%+ losses. In my opinion ,provides a very nice entry price, especially Sydney Airport. This being said you should do your own research and this is not financial advice
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The information above should not be taken as financial advice. Youth Investment Group has no liability for personal financial interests or investment decisions. You should make your own investment decisions based upon your own research and what you believe is best for you.
Written by Tyger Fitzpatrick, founder by YIG.