Financial markets often are directly correlated to the macroeconomic, social and political factors far out of our control. Herds of investors are prone to reacting in extremes whenever these macro factors exhibit sudden change.
The coronavirus shutdowns are a prime example. But the same factors — fear, panic, herd mentality — drove the declines in 2008 and before.
Experience shows that most people simply do not have the required temperament or risk appetite to hold their investments through short-term market shocks.
To avoid getting gored, focus instead on owning a collection of investments that create a “firewall” against extreme market shocks and can ensure that your savings remains preserved in difficult times yet thrives in good times.