Short-term crises become increased negative investment volatility – i.e. the value of investments falls sharply.
What seemed like a good long-term strategy – to be the owner of good quality, successful, profitable businesses around the globe – can suddenly look like a shirt cut to ruination and destitution.
Our ego tries to override our intelligence. It wants us to stop being long-term investors and start being short-term speculators. To start analysing, hypothesing and predicting which way things will swing next. In extremis “ego” can force us to act.
We extrapolate forward recent drops in value and blow a minor setback up into a full blown permanent disaster.
There’s a real urge to act, to do something, anything. Everything is going to hell in a hand basket – we’re stuck between the sword and the wall.
But, if we catch ourselves for just a moment, if we remind ourselves that we have put together a very nice long-term investment strategy – based on the enduring ability of humans all over the globe to invent, innovate and profit – we arrive at a simple conclusion.
When stuck between the sword and the wall the safest thing to do is not move a muscle.