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The market dropped 12% last week. Is it time to freak out because the sky is falling? Or is it just an acorn?
When Chicken Little gets hit on the head by an acorn, he thinks the sky is falling. On his way to warn the King, he encounters Foxy Loxy who claims to know exactly where the king is. Foxy Loxy leads Chicken Little back to his fox den and eats him.
Foxy Loxy is the media.
Chicken Little is the individual investor.
The acorn (this time) is Coronavirus.
The fox and the media feed on people’s fears. The more fearful you are, the more you’ll watch.
It’s in THEIR best interest to convince you the sky is falling… even though they know it’s just an acorn.
Acorns fall all the time. Here are some from the last 10 years:
And then there were the doozies to start the century:
Yet despite all the falling acorns, if you had invested $10,000 in March 1990 in an S&P 500 index fund (and reinvested the dividends), today you would have $158,000.
If you had bought and held, you’d be $148,000 richer today.
But the media won’t tell you that. They want you focused on the emotional short-term.
Yes, Coronavirus will affect the global economy and your short-term portfolio returns, but no more than any of the other acorns that fall year-in and year-out.
Is it time to freak out? Nah, don’t listen to them.
It’s just an acorn.