The All Ordinaries (ASX: XAO) is down another 3%, marking a very painful week with a 10% drop. Probably the worst since the GFC.
Investors have coped with the threat of various things over the past year, but the spread of the infection in Japan, South Korea and Europe now has the market really worried.
Supply chains are being disrupted and there are worries about lockdowns. Chinese efforts to lock down the spread the coronavirus seemed to have worked – will western countries be faced with a similar dilemma of shutting down cities? Sounds like scary stuff.
Should investors sell all their shares?
With how hard markets are dropping it certainly seems like investors are cashing out.
But don't forget, the share market has been through tough times before. Infections are a bit different to other economic problems, but the result is the same – market falls. Eventually markets recover. The share market recovered from the GFC. It recovered from the dot com bust. It recovered from world wars. It recovered from the Spanish Flu.
And besides. If investors are going to leave the share market, where are they going to put the money? Interest rates are essentially at record lows and now they're predicted to go even lower. There is something to be said for capital protection – a 1% return is better than a 20% capital decline. Gold is going up but it doesn't produce any cashflow. Cryptocurrency doesn't produce cashflow. Property is still expensive.
It's times like this that makes me want to add more money into my portfolio, not sell at lower prices. The moment you sell you lock-in the loss/decline in value that this week has seen. For the people that sell, when would they buy back in? A week? A month? A year? It's impossible to guess when the bottom of this will be, you'd need a crystal ball. You could miss out on the fastest part of the recovery by not being invested.
Don't forget the great phrase shared by Warren Buffett, "Be fearful when others are greedy and greedy when others are fearful."
