With so much news regarding the Corona Virus at present, it is important for investors to have perspective and understand that there are millions of variables that fuel the financial markets, not just one.
There are millions of variables all interacting
simultaneously within the financial markets, the control of which is not
possible by any single investor or group of investors, including the highly-experienced
All these variables impact each other and each
financial instrument positively and negatively by varying degrees of
magnitude at any given time.
At the end of any given period the aggregate of all the
variables and their degrees of effect at that time will be either net positive
or net negative.
It can take just one of these millions of variables to affect the financial markets negatively at any
given time. Or positively too.
Investors will never
know in advance with certainty which variable that might be, nor the magnitude
of the effect of that variable.
This is one of the
fundamental truisms of investing in financial markets.
These variables don’t even have to occur in the financial arena.
They could be a shock geopolitical event such as an
unexpected U.S. Presidential election result, a terrorist attack, a natural
disaster or possible outbreak of disease.
That’s why one of the guiding principles that all investors
should subscribe to, at all times, is that ‘anything can happen.’
Having an ‘anything can happen’ mindset over the long-term allows
one to adopt an unbiased approach to the financial markets rather than
pinning one’s hopes on a notion, story or a single emotionally-charged variable.
Armed with this neutral mindset you’ll be open to the
possibility of a positive or a negative outcome and can position yourself
accordingly to either.
This is called objective risk management.
The degree of effect of any given variable on the financial
markets, such as the current spread of the Corona Virus, does not remain
It changes as time passes and as other variables gain more
or less importance to exert their effect.
That is why understanding the ‘multiple variable effect’ and
having a big picture perspective is so important as an investor.
Markets hate shock events and uncertainty.
Using history as a guide, the market rose within a day or
two of a U.S. President’s assassination, an attempted Presidential
assassination and within six days of the 9-11 terrorist attacks on the World
Trade Centre, such is the impact of thousands of interacting variables.
This is the risk environment of the financial markets and
something that all successful investors must learn to understand, accept and
With a clear set of non-discretionary mechanical-based
rules, any variable is easily addressed in a completely objective manner
without fear or emotion in accordance with your Investment plan rules.This is the freedom that systemised investing
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