Why investors should try not to panic

Why investors should try not to panic

The ongoing march of Covid-19 has seen billions wiped off global stock markets, governments enact emergency fiscal measures, and central banks ease monetary policy with the aim of supporting economies through this event-driven crisis

The headlines scream panic, with doom-laden pronouncements about the stock market and the economy, not to mention the very real health risk to the public. Even the most experienced investor might have been surprised by the sudden falls in global markets that have reduced the value of people’s pension pots and investments in the past couple of weeks.

Images of traders’ screens turning red amid worrying statistics showing a rise in the number of people contracting the coronavirus worldwide – and in nearby communities – is enough to test the nerve of every investor.

Yet now is not the time to panic.

As respected investment guru Warren Buffett says: “In the 20th century, the United States endured two world wars and other traumatic and expensive military conflicts; the Depression; a dozen or so recessions and financial panics; oil shocks; a flu epidemic; and the resignation of a disgraced president. Yet the Dow rose from 66 to 11,497.”1

Investing for the long-term

There is no doubt that Covid-19 will have real and lasting impacts on the economy, as measured by global GDP figures. Global supply chains have been disrupted, consumption is falling as more people stay at home, and companies will struggle to increase earnings. Think of all those cancelled events and the impact on travel companies, entertainment and hospitality providers, and food and drink manufacturers. Clearly, this disruption will be felt.

Any yet while we don’t know to what extent these impacts will affect the economy, not to mention our broader communities and wellbeing, it is fairly likely that in the long-term it will be business as usual for the global economy.

When things eventually return to normal, it is true that all those missed cups of takeaway coffee, flights, sandwiches and movie tickets will never be recovered. But once those shorter-term impacts pass through, consumption will pick up once again – that is to say, people will begin living their lives in much the same way they were before Covid-19 took hold.

In some respects they may even see improvements. The price of oil has collapsed, which may lead to cheaper petrol prices, while people living in countries where the central bank has cut interest rates may see a reduction in their mortgage payments. Governments are also introducing fiscal boosts that may have an impact on the money we have available to spend.

In the same way, economies will also recover. The question remains whether the US, European or UK economy was poised for recession before Covid-19, or whether the coronavirus was merely the catalyst for a recession that was inevitable after the longest economic expansion on record. Either way, markets will eventually recover in the same way they have in previous decades.

So while it is perfectly reasonable that investors feel a degree of panic when crises take hold, it is also true that what can feel like an emergency in the short term may not hold as much significance 10 years down the line. Indeed, long-term investing helps smooth out the peaks and troughs of the stock market and can be a more successful strategy than trying to time the market.

Regular investing

A “buy-and-hold” strategy will enable you to take advantage of compound interest (when you generate earnings on previous earnings) to amplify returns, but it only works if you leave money invested and give it time to work.

But some long-term investors also invest regularly, drip-feeding money into their investments over time to benefit from “pound cost averaging”. This is where your cash buys a greater number or units or shares in an investment when prices fall, prompting higher investment returns if a recovery takes place. Simply put, in times such as these – when billions have been wiped off the value of companies – regular investors will be able to purchase more for their money.

Active versus passive

It is also the case that active fund managers have the ability to add value in both rising and falling markets, particularly the latter. Investors who passively track an index will see their investments fall along with the market in which they are invested, whereas an active manager will be working constantly throughout periods of volatility to ensure his or her fund adds value.

Selecting an active fund manager with a history of creating real returns is paramount to ensure investors stand the best chance of riding out stock market wobbles and creating wealth over the long term.

With the above in mind, investors with a sensible, well-diversified, long-term investment strategy in place should arguably try not to panic.

20 Março 2020
Mark King
Mark King
Investment Content Specialist
Share article
Share on twitter
Share on linkedin
Share on email
Key topics
Related topics
Share article
Share on twitter
Share on linkedin
Share on email
Key topics
Related topics


Why investors should try not to panic

1 Buy American. I am, The New York Times, 16 October 2008.

Important Information

Past performance is not a guide to future performance. The value of investments and any income is not guaranteed and can go down as well as up and may be affected by exchange rate fluctuations. Your capital is at risk. This means that an investor may not get back the amount invested.


This material is for information only and does not constitute an offer or solicitation of an order to buy or sell any securities or other financial instruments, or to provide investment advice or services.


The analysis included in this document has been produced by Columbia Threadneedle Investments for its own investment management activities, may have been acted upon prior to publication and is made available here incidentally. Any opinions expressed are made as at the date of publication but are subject to change without notice and should not be seen as investment advice. Information obtained from external sources is believed to be reliable but its accuracy or completeness cannot be guaranteed.


This document is not investment, legal, tax, or accounting advice. Investors should consult with their own professional advisors for advice on any investment, legal, tax, or accounting issues relating an investment with Columbia Threadneedle Investments.


This document is distributed by Columbia Threadneedle Investments (ME) Limited, which is regulat-ed by the Dubai Financial Services Authority (DFSA).


For Distributors: This document is intended to provide distributors’ with information about Group products and services and is not for further distribution.


For Institutional Clients: The information in this document is not intended as financial advice and is only intended for persons with appropriate investment knowledge and who meet the regulatory crite-ria to be classified as a Professional Client or Market Counterparties and no other Person should act upon it.


Issued by Threadneedle Asset Management Limited, registered in England and Wales, No. 573204. Registered Office: Cannon Place, 78 Cannon Street, London EC4N 6AG. Authorised and regulated in the UK by the Financial Conduct Authority.


Columbia Threadneedle Investments is the global brand name of the Columbia and Threadneedle group of companies.

Related Insights

23 Novembro 2021

Fixed Income Desk

In Credit - Weekly Snapshot

In Credit Weekly Snapshot – November 2021

Our fixed income team provide their weekly snapshot of market events.
Read time - 3 min
19 Novembro 2021

Investment team updates - Bullet points 19 November

Latest news from around the investment desks.
Read time - 3 min
10 Novembro 2021

Heiko Schupp

Global Head Of Infrastructure Investments

Benjamin Kelly

Senior Analyst, Global Research

Green hydrogen is finally showing its true colours

We look at what is driving recent heightened interest in hydrogen as a clean alternative to fossil fuels, the catalysts required for it to become a viable solution, and the opportunities this might present from an infrastructure point of view.
Read time - 3 min

Também poderá gostar de

Sobre nós

Milhões de pessoas em todo o mundo confiam na Columbia Threadneedle Investments para gerir o seu dinheiro. Acompanhamos investimentos para investidores individuais, consultores financeiros, gestores de património, bem como companhias de seguros, fundos de pensões e outras instituições.


Para mais informações sobre a Columbia Threadneedle Investments ou os nossos produtos, entre em contacto connosco ou com o seu consultor.

Responsabilidade social corporativa

Nuestro objetivo consiste en obtener resultados positivos que satisfagan las necesidades de nuestras partes interesadas, y nos comprometemos a actuar siempre de forma responsable y transparente, velando por los intereses de las personas que nos confían la gestión de sus inversiones.