No one wants to talk money in a time of tragedy and when watching the disaster unfold in Japan our thoughts immediately go out to those affected, but often intertwined with news on the disaster is news on the financial effect.
If you’ve ever watched the response of markets in the event of any large scale, or natural disaster, you’ll know it’s always volatile.
Markets immediately react and sharp sell offs follow, then the next day bargain hunters appear and push the market up, until there’s a release of more bad news and the markets react again.
It’s a climate of nobody knowing anything, itchy trading fingers and overreaction to any piece of good or bad news.
And if you’re glued to the latest developments, with your portfolio in mind, you’ll end up with frazzled nerves.
If you’re a long term investor, you’ve probably developed the ability to put the market reaction in context and if you want to be a smart investor, you need to develop that ability.
Financial markets are unpredictable, but have had a way of accommodating equally traumatic news and continuing on, from the 1995 Kobe earthquake, to September 11 2001, or the 2004 Asian Tsunami.
The current Japanese situation is unique, in that it adds the prospect of nuclear fallout on top of a massive natural disaster, but again, it becomes another issue of short term speculation.
A more measured environment will emerge, there’s no suggestion we’re near that point, but the long term history of markets has proven reliable as a guide that market fear will dissipate.
An investor, with a diversified portfolio, who has grounded themselves with education and discipline, will understand the unpredictability.
Speculators who found themselves with a portfolio full of ‘hot tip’ uranium shares might be sweating a little.
Peter Mancell is a director of Mancell Financial Group and FYG Planners AFSL 224543. This information is general in nature and readers should seek professional advice specific to their circumstances. If you’d like help with your financial future, we might be Australia’s best financial planner. We think we’re the best financial advisers in Tasmania.
