How to deal with black swan events?

The market seems to be getting more and more unpredictable and volatile since Donald Trump initiated the tariff trade war with China. And we have since experienced a multi-year pandemic, the wavering stance of different FED governors on interest rate hike and most recently the war between Russia and Ukraine. At the same time, there are different expert predictions but no one can successfully guess the market consistently. There was an analyst predicting a market bottom on 9 Mar and yet the HSI fell more than another 10% in less than one week. Then a wall street analyst came out to downgrade the ratings and slash the target price of 28 US-listed Chinese stocks…. And these stocks immediately rebounded over 20% in the next 2 days.

What is the best course of action for ordinary investors like us?

We should resist the temptation to rush buying and selling decisions in times like these.

Try to stay away from the finance media as it is advertiser’s best interest to encourage trading. Stay disciplined and do nothing and stick with your long-term investment plan – ideally a well-diversified portfolio aligned with our personal finance situation, risk appetite, investment objective and rebalance periodically. It is not an easy task, especially in times like these. Investors with a long-term horizon should have confidence with market resilience.

Last update: 5th April 2022