The S&P/ASX 200 Index (ASX: XJO) is still firmly in bear market territory, having lost around 29% of its value since this ASX market crash began in mid-February.
Even though this loss is still substantial, the ASX has actually remained quite calm in the last week or two, pretty much hovering around the 5,000 point level.
Yet you will get no shortage of media reports and commentators suggesting (or preaching) that this is only the start of a far more severe crash. Remember, we saw peak-to-trough losses of more than 50% during the GFC over a decade ago. And that was over a duration of 18 months (we're only seven weeks into this market crash).
But does it really matter if the markets tank further from here? Of course, many people anxious about their net worth will tell you "of course it does". But here's why I think it doesn't really.
The stock market is a long-term wealth-building machine
The great investor Warren Buffett once said that the stock market is a mechanism that transfers wealth from the impatient to the patient over time. I glean from this nugget of wisdom that the best thing to be doing right now is buying shares from those impatient investors that are selling (and that will sell more if the market dips any further).
And the second-best thing? Doing absolutely nothing at all.
See, the stock market will recover. It's not a matter of if, but when.
We have seen far greater threats to the economy and the world than the coronavirus, including two world wars and the 1918 Spanish flu. If an investor had sold everything then, their grandchildren would be cursing them today, mark my words!
This will burn out eventually, the economy will reopen, and life will get back to relative normalcy. And by that point, the ASX will have substantially recovered in all likelihood.
So if the market does tank next week, or next month, either buy more shares or do nothing at all. A falling market won't really matter in the long run if you choose one of these options. That's what all the great investors of the world like Buffett are doing, so why not follow their footsteps. There's no penalty for plagiarism in investing!
On the other hand, it probably will matter if you try and 'pick the bottom' or sell everything and 'go to cash'. Very, very few investors end up on top this way, and so I wouldn't try my luck!
