Crisis In Japan

What  Investors Need To Remember About The Crisis In Japan

                                                                            By: Brendan Magee, AIF

There is no doubt that when the world’s third largest economy experiences an earthquake and it’s on the verge of a nuclear disaster there will be a ripple effect on investors everywhere. For investors it will be difficult not to overcome by the hyped up doom and gloom being drummed up by all the media outlets.

So I thought it important to help investor focus on a view things that could prevent them from making impulse investment decisions as a result of the crisis in Japan.

First, through proper diversification you are prepared for these kinds of events. Think back to 9-11-01, the financial meltdown of 2008, or if you’re old enough the Kennedy assassination. These are events that have a few things in common. First of all they are so huge in nature that they could not be predicted in advance, and like Japan, you have no way of knowing how the world’s markets will react to them.   Proper diversification means that the different investments that make up your portfolio react differently as economic conditions and events occur.  In this case as Nikkei Index reportedly went down on the 15^th of March, U.S. Large co. Stocks were -1.17%. This obviously helps to offset the big losses.

Proper diversification helps to create opportunities to buy low/ sell high. When most people panic and sell stocks or markets that have gone down out of sheer panic, the prudent investor realizes that huge loss is an opportunity to buy stocks at a huge discount. Rather than run from down markets, perhaps we should learn to embrace bear markets as a tremendous opportunity.

Secondly, remember  markets are people. Human beings have a tremendous ability to pick up the pieces and rebuild. Remember some sixty years ago the majority of the world had been ravaged by war. Japan had two atomic bombs dropped on its country. With help, the world recovered. It rebuilt what had been blown to smitherines and it was built stronger than before. Japan will recover. Markets recover and they recover quickly. If you have stocks in Asia and Japanese markets, do not think that all is lost.

Lastly, in no way shape or form should you invest based on what you or your friends are reading or hearing from the media. The media’s interests are radically different from yours. They need to keep you tuned in, and they do that by pounding the air waves with doom, gloom, and tragedy. That agenda is completely at odds with yours as an investor. No doubt there are people in Japan who are experiencing terrible hardships and we pray that God provides them with the relief and care that they need and deserve, but what has been reported by the media what is predictable in what the media has reported has already been absorbed by the world’s capital markets.

It is only new and unknowable information that will move the world’s markets. Anyone telling you what to do with your money based on what has happened is preaching a message of gambling and speculation. For an investor this is the equivalent of radioactive waste. You can’t see it as it seeps into your investment decisions, but the impact of it is felt for a lifetime. You want nothing to do with it.

It is especially important in times of crisis to remember and adhere to the fundamentals of investing: Own equities, diversify, buy low/sell high. Stick to these principals and history shows us you will come out of this crisis better for having gone through it.

Brendan Magee is the president of Inevitable Wealth Coaching in Drexel Hill, Pa. With questions or comments call him at 610-446-4322 or e-mail him at Brendan@coachgee.com . You can follow him on the facebook at Facebook.com/Brendan Magee-investor coach. Tune into the Investor Coach’s radio show on am1340 WHAT every Sunday at 10:30am.