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The Coronavirus is just one variable among many.

February 27, 2020
3 people like this post.

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 professionals.

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 constant.

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 embrace.

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 allows.

Find out more, Visit: sharewealthsystems.com

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