Volatility Creates an Emotional Roller Coaster for Investors Volatility Creates an Emotional Roller Coaster for Investors Concerns about the spread of the coronavirus on business activity are weighing heavily on global asset markets, and central banks have moved to support the global economy with lower interest rates and other monetary policy measures. The U.S. Federal Reserve (Fed) has made emergency cuts to its policy rate, bringing it to near zero and has announced a US $2 trillion security purchase program to inject liquidity into the financial system (quantitative easing). The Bank of Canada has cut interest rates again this morning to support the Canadian economy, reducing its overnight lending rate to 0.25%, while the G7 group of countries announced that it would be willing to use “all appropriate policy tools” to provide economic support amid the ongoing COVID-19 outbreak. I know these facts may not be comforting to investors who are coping with the uncertainties of the Covid-19 outbreak. We are all struggling to comprehend the potential loss in economic activity, corporate earnings, employment and our investment portfolios. However, we as investors know that equities, more than any other asset class, have always been the greatest source of growth in our portfolios; so, in these times of uncertainty, therein lies our quandary.   At times like these there is a tendency to focus on what is going on right now, instead of thinking about what we want over the long-term. For most of us, first and foremost we want our loved ones to remain safe and healthy, following that we want financial security. Using history as our guide, investors with a 50-year investment horizon will live through 14 bear markets during their investment lifetime (as defined as a 20% drop from previous market highs). That is a bear market once every 3.57 years. History would also suggest that during those bear markets, investors should expect their equity portfolio to lose 32% on average. It’s almost enough to wonder why we as investors put money into equities at all. However, stocks as represented by the S&P 500 Index, returned on average, 10.5% per year over the past 50 years. That’s a doubling of their values (on average) every 6.9 years, notwithstanding all the bear markets.   Timing the Market is nearly Impossible   It is important to use historical facts when trying to overcome emotion. Most people have seen the research demonstrating that missing the best 10 days in the market over a 20-year period would cut their investment returns in half, while missing the best 30-days would actually result in a negative long-term total return. However, most promoters of this research fail to communicate the two most important points: 1) Half of the market’s best days in history have happened during bear markets and, 2) Another 30% of the market’s best days have happened in the first two months of a recovery. In short, timing the market is often a fool’s errand, particularly during the times of extreme pessimism.   Finally, I will conclude by reminding you of the 20-year period from 1998 to 2018, a period which included the tech wreck, the Sept. 11 terror attack, the global financial crisis, the European debt crisis, Brexit and many infectious disease scares (H1N1, SARS, Ebola, and MERS) and the S&P 500 Index still climbed an average of 7% per year. A $100,000 invested in the market in 1998 would be worth over $400,000 today.   We will get through this by applying the same key principles we have applied in each of the other crises and bear markets we have already lived through; by thinking long-term and staying the course. If you are finding this advice increasingly difficult, have a look at the attachment. Click here   Have a great weekend and stay healthy!   Tracey   Source: Original article by Brian Levitt, March 12, 2020 Invesco Canada blog. CI Funds March 16, 2020 investor letter.