Panic begins to set in…
I know: China keeps crashing and you start to get really worried. I want to help you.
I won't tell you how it will end, also because I still don't foresee the future. Instead I will leave you a telegraphed list of things NOT to do.
1. DO NOT change your investment plans.
2. DO NOT confuse long term and short term.
3. DO NOT change the duration of your investments (aka time horizon).
4. DO NOT search for perfect market-timing.
5. DO NOT react emotionally by buying and selling stocks in a panic.
6. DO NOT forget to observe the uneven reactions around you and the evolution of the market (it will be a good lesson, believe me).
7. DO NOT listen to market prophecies and glamorous last-minute gurus.
8. DO NOT read too many financial papers.
9. DO NOT watch too many stock market news.
10. DO NOT forget to remember how you felt and how you behaved (it will serve as a pro-future lesson, because crashes like the Chinese one are the bread and butter of the financial markets).
How far can stock markets go down?
Even if you don't know how it will end, try to think about it: with bonds that yield nothing all over the world and deposits even less - that's right, I remind you that the German 2-year bond at maturity yields -0,38% and that 5-year returns -0,11% – how far can stock markets go down? Answer yourself.
