One feature of market psychology is that investors have a tendency to think things will continue along their current trajectory forever. In recent years markets have been remarkably stable. This is measured in financial market terms by the volatility or variability of returns. Many investors started to believe the market would continue to stay stable and/or that volatility would even fall. After a long period of stability some were taken by surprise by stronger than the market expected US payroll data released on Jan 26 which triggered a sharp sell off. This was exacerbated by the pressure of forced selling from highly geared investors who had been betting things would stay stable. This activity, which shocked many, is really just a natural feature of markets. There are five things you should remember about markets:
Moves like this in markets happen
Your response to the recent moves tells you a lot about you DNA as a risk taker
Where you are at in your investment journey makes all the difference
Active investors use volatility to their advantage
Fundamentals are all that count in the long run
For me personally this is what I fall back on in tough market environments. Just because a bunch of investors lost money beating the markets would be stable and were forced to sell shares, the demand for Fisher and Paykel Healthcare's infant Optiflow nasal hi flow oxygen canula did not change one iota. Luckily for mums worried about their babies, hospitals don't look at whether the Dow was up or down before purchasing life saving equipment like this. Similarly Americans are still getting CSL's flu medication regardless of the share market. These companies, as well as the others in Fisher Funds' portfolios, are fundamentally sound, high quality and are growing. The chance to buy shares in world leaders like these at lower prices is one we should all embrace.