Mr. Zweig is among my favourite reads.
Once again he's offered a worthy read
We Can’t Prevent Market Panics. We Can Control How We React. - WSJ (paywall?)
The subtitle is "
The dangers lurking in the market can be hidden or delayed, but never eliminated. For investors, slumps are a chance for introspection–and, sometimes, new opportunity."
Jason Zweig wrote:Until recently, many investors believed central banks and other policy makers had repealed the business cycle and that making money in the stock market was something you could take for granted—in much the same way that science and technology seemed to have beaten back diseases that had been the scourge of humanity for millennia.
Maybe investors a century ago and more had a wiser view. They believed the world was governed by unseen, omnipresent powers that could be appeased but never controlled—and that financial panics were a form of divine retribution for the sinful excesses of prosperity.
We shouldn’t regard market panics as quaint artifacts from the days of ticker tape and trading by telephone. Rather, they are forces that can be hidden or delayed but never eliminated. And believing that panics have become obsolete is a precondition for their recurrence.
The modern history of financial markets is a chronicle of attempts to control risk—if not eliminate it. One after another, they have all failed.
For those of us who've been through a number of these events, such as
Black Monday (1987), the dot-com collapse, the financial crisis, and others I've long forgotten can attest to these failed attempts to control risk.
Jason Zweig wrote:So ask yourself: Have I been taking more risk than I realize? Conversely, how should I turn panic into opportunity? How can I improve my portfolio and restore a sense of control? Should I sell some stocks or funds to generate a tax loss I can use to offset gains or income? Do I have long-held mediocre or risky stock positions I’ve been reluctant to dump until now because that would have generated a taxable gain I’d no longer incur at today’s prices?
Blind faith in tools for controlling financial risk has never made sense. If risk could ever be eliminated, investors would immediately turn so euphoric that they would drive the prices of financial assets sky-high— thereby creating an enormous new risk out of the absence of all the old ones.
Investors should never stop trying to manage their risks. But they should never believe that they, or anyone else, can eliminate them.
Worth pondering, particularly in light of recent events. Maybe the correct answer for some (many?) is stay the course. Based on posts that I'm reading here on FWF that would seem to largely the case for those that have been around for a while. But that doesn't mean be complacent. You can always learn, because each event has some different characteristics and learning opportunities.
What are your blind spots? Has your faith in your strategy, the function of your investment vehicles (i.e. fixed income ETFs) or financial institution (overloaded and hard to reach) been tested. Have you given consideration to what you've now learned?