A recent headline caught my attention: “Pandemic threat rocks economy.” Wow! First we had the financial crisis and now this. Maybe we’ll sink into a full depression. How will this affect your portfolio, and what can you do to protect your money?
Okay, that’s enough sarcasm. I didn’t bother to give a link to the article because its body was quite disappointing after reading the blazing headline. It says that there is no evidence that the swine fly will turn into a pandemic, but if it did, the economy would suffer. Thanks for the pointless panic.
Here is my approach for protecting my money from this “pandemic threat”:
1. Do nothing. If my investments made sense before, they still make sense now. If a pandemic does affect the economy, equity prices will adjust too quickly for me to take advantage or protect myself.
2. Avoid news outlets with sensational headlines and little to back them up. Getting all frothed up with fear may cause me to make rash decisions. Buying and selling too often is expensive, both in terms of fees and the cost of buying high and selling low.
3. Think long term. What matters is where my investments are in 3 years or more. If I need the money sooner, I should have it in cash or a rock-solid fixed-income investment.