Thinking long-term is helping me get through the coronavirus crisis on both the share market and healthcare side of things.
Australian life has completely changed over the past few weeks because of the coronavirus. But it’s there to help keep us safe and to save lives, particularly the more vulnerable among us. But at some point life will mostly go back to normal. The world wars went on for years, however eventually things went back to normal living.
Why thinking long-term is helping me with the share market
The S&P/ASX 200 Index (ASX: XJO) has fallen 32% in just over a month. That’s a very dramatic fall in such a short amount of time.
It seems scary, particularly if you’re new to investing in the share market. It doesn’t often fall like this. Indeed a large fall only seems to only happen once a decade, on average.
Declines caused by economic factors should be expected, even if they appear at random. The economy goes in cycles as investors and society in general goes from exuberant to fearful. Or when people take on too many risks with debt which then blows up in their face every so often.
Don’t forget that the long-term share market return has been around 10% per annum which includes all of the dips and recessions of the share market of the past such as the GFC, the tech dot com bubble bursting and so on.
There’s nothing we can personally do from stopping these falls. Share prices fall because someone is willing to sell their share of a business for a cheaper price than before. You can choose to ignore that lower price or perhaps buy more shares at a lower price if you wanted to.
This particular period is unnerving because it’s altering how we live our lives. It’s causing huge numbers of people to rapidly be unemployed across the world. A healthcare crisis has a terrible human effect, not just economic impacts. But this will pass – just like the ‘Spanish’ Flu faded away after a year or so.
Investment side of things
If you’re able to continue investing during this period then you’re faced with widespread lower share prices. The best time to buy shares is when prices are much lower and investors are fearful. People are definitely fearful right now.
Just like at various shares in different industries:
The National Australia Bank Ltd (ASX: NAB) share price is down 45%.
The Sydney Airport Holdings Pty Ltd (ASX: SYD) share price is down 28%.
The Wesfarmers Ltd (ASX: WES) share price is down 30%.
The Nick Scali Limited (ASX: NCK) share price is down 60%.
The WiseTech Global Ltd (ASX: WTC) share price is down 50%.
Apart from NAB, I could make a decent argument about buying each of the above shares, that they’re each a potential opportunity, particularly with how low the RBA interest rate is now.
I’ve been investing during this period in what I think are great value opportunities. We may not be at the bottom. The next month could be rough for the US and could cause investors to be more fearful. But, if markets fall further I plan to keep investing so that I’m buying at low prices.
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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Sydney Airport Holdings Limited. The Motley Fool Australia owns shares of National Australia Bank Limited, Wesfarmers Limited, and WiseTech Global. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
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