The recent earthquake as far as 15,000kms away near Caracas (in Venezuela) or a fire accident somewhere in a Mumbai high rise which might kill a few people are events which trigger an immediate response from our collective human psych; first, what could have prevented this catastrophe and second (and more individual one) is to quickly reach out to the toll-free number of the insurance company.
While this is intuitive and normal, both responses are from those who are NOT yet impacted by such events. And more importantly such surge in enquires from news reading public are but temporary until the next catastrophe. The call to action, even if there are executed only by a minority section of the population.
The Sure-fail strategy when it comes to investing
In the investing world, a corollary to this is getting excited based on recent high-performance return from any particular asset class. Everyone from business news reporters, retail investors and analyst community highlight the searing performance of the asset class. How much a dollar invested 6month or a year ago would be worth and cover stories with charts and interviews of how much of the asset allocation would have made a difference to the portfolios etc. While both novice investors and seasoned ones talk about it. It being amplified by main-stream and social media makes it a certain FOMO phenomenon. The asset classes that fit this bill at this moment is – International investing and GOLD. The guiding principle from successful investors remains true despite several decades of market cycles and one should stick to it. BUY Low and SELL High. Second and more importantly being contrarian is a better strategy for long term investors. However, it is easier said than done.
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