It’s quite a fascinating day (week)! Markets are falling across the globe, and even the Baltic market has managed to drop 4%. You’d think that this isn’t a huge deal since markets drop all the time, but the expectation of a crisis happening has been hyped so much that people seem almost excited to see if the market will properly crash.
At first I was quite unmoved by the market dropping since I don’t pay much attention to day-to-day movements but suddenly my Facebook newsfeed was taken over by all sorts of panic, which made me take notice.
Firstly the biggest national business paper of course “helpfully” wrote about how to avoid losing money in a crisis and how to last-minute-rebalance your whole portfolio if you’re afraid and emphasised just how much the markets dropped. (For example Shanghai Composite has dropped 9%!!! Leaving out the fact that 1Y returns are still 45%…)
There was also another subset of personal panic in the form of both gleeful “Kiyosaki was right!” or “Now it begins!” or just “Oh no, the sky is falling!” type of posts.
What to do? What to do?
I think this is a brilliant case study about how panic affects the masses. Seriously, people have been so mentally prepared (or paranoid, depends how you look at it) for a crisis, that the moment something started moving on the market at all then it released an avalanche of panic that caused thousands of people to sell. You’d think that investors would be a bit more rational, but this shows amazingly well just how quickly all rationality is wiped off when your stock portfolio drops into the red.
I’ve also had several people already ask me what to do or what I’m doing about the current situation (as in, whether or not I’m selling). I’ve been honestly super confused at how so many people have been super convinced that the crisis is here and now! How do they know this? I’d be hard pressed to make any predictions about how this will turn out, honestly I think we’re 50-50 at this point that the market will bounce back once the Chinese & US markets have bled out some money.
However, what am I doing? For fun I actually logged onto my stock account to see how everything looks pretty in red to see if I had any emotions on the topic of selling. Not surprisingly, no emotions. I was just left with the feeling that I should think about buying and I should figure out how long to wait before buying, if I think that the Baltic market will drop more or it’ll bounce back relatively quickly.
My recommendation – all those investment plans you made a while back when the market was rising? Look them over and figure out why you’re panicking. The market dropping in such a manner is not at all uncommon, it happens every now and then and even if it is the start of a huge crisis (which I don’t believe, but I’m not an economist), then figure out what you’re going to do calmly and in a rational manner, not after reading all the panic in the media. (Remember – drama sells and the stock market dropping is always very dramatic. Soon we’ll be getting news about people losing their lives’ savings like we did from China a couple of weeks back already!)