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Stocks Plunge and Investors Panic

Stocks Plunge and Investors Panic

April 9, 2020

Stock markets are volatile, writes Peter Watson.

Speculating and attempting to predict short-term stock price changes historically has not been a successful strategy for investors.

As we have recently seen, stock market values can shoot up and plunge down from day to day. These volatile swings also happen within the days that stocks are traded.

One stock can have a value mid-morning, then lose 20% or more of value a few hours later. In some cases, end the day back where it began before the roller coaster ride.

In my opinion, trying and speculate and attempt to capitalize on short term price movement is an extremely dangerous strategy. You might make a few correct decisions.

Those correct decisions should be interpreted as a result of luck, as opposed to the result of possessing some reliable trading skills.

Magic stock trading skills do not exist. Countless amounts of data and research reports document that speculation can work occasionally, but it is not a reliable repeatable skill.

What should you do during times of extreme stock market volatility?

First, speak to your financial planner about how stock market volatility is affecting you directly. This does not mean figuring out the way of speculating during volatile times but examine your personal situation.

Second, exercise patience. Economic and stock market storms come and go. This type of volatility that we have experienced recently is natural and should be an anticipated part of investing.

In all the hundred plus years of stock markets, every market crash has recovered.

Be patient. This storm will pass.

Peter Watson is registered with Aligned Capital Partners Inc. (ACPI) to provide investment advice. Investment products are provided by ACPI. ACPI is a member of the Investment Industry Regulatory Organization of Canada. The opinions expressed are those of the author and not necessarily those of ACPI. Peter Watson provides wealth management services through Watson Investments.