Why you should ignore Tesla and the coronavirus
Tesla’s stock price has exploded recently, and the coronavirus is a serious threat impacting thousands of families around the world. I’m not downplaying or minimizing the impact and severity of either of these, especially the coronavirus. That’s a serious health crisis, and my heart aches for the families affected.
But from an investor's standpoint, ignore what you read about them on a daily basis.
The headlines will do nothing but confuse and scare you.
Look at Tesla, for example. At the beginning of 2019, Tesla was one of the worst investments you could make according to news outlets. Here are a few headlines:
Tesla’s horrible, no good, very bad week is a bad sign for its 2019 outlook - Quartz, Feb 2019
Tesla drops 6% as quarterly deliveries underwhelm Wall Street - Reuters, October 2019
Now what are they saying?…
Tesla Stock Soars by More Than $100 - NY Times, Feb 2020
Tesla Stock Is Up Almost 80% in 2020. Here’s What Could Happen Next. - Barron’s, Feb 2020
But all the success doesn’t come without opposition…
Here’s How Tesla’s Stock Could Hit $0 - Forbes, Jan 2020
How the heck can you make a rational decision based on these stories??
DRAMA SELLS. But drama triggers emotion, and as I’ve said in other blogs, emotions and investing don’t play well in the sandbox together.
And what does the news tell us about the stock market and the coronavirus?
Chinese stocks plummet as coronavirus outbreak worsens - NY Post, Feb 2020
U.S. stock markets close sharply lower amid fears about spreading coronavirus - Washington Post, Jan 2020
Dow drops more than 600 points as coronavirus fears hit global markets - LA Times, Jan 2020
More of the same.
But MarketWatch put out an interesting article recently on how markets reacted to past viral outbreaks. The major takeaway? They were short term blips on the radar, nothing more.
Traders, people who capitalize on short term market volatility, salivate over stuff like this, because there is opportunity for them in chaos.
But I don’t work with traders.
Instead, I work with Investors, people who have a long term (5+ years) investment timeline, where day-to-day movements don’t matter as much as how investments perform over time.
And for all the investors reading this, ignore the noise. That’s all it is. Sure, I would have loved to buy Tesla at its low last year and now (as of 2/22/2020) it is worth $900/share, but I don’t have a crystal ball.
Hindsight investing is easy. “I should have bought (fill in the blank) when it was (fill in the share price). I’d be rich!”
But hindsight investing doesn’t help you grow your money.
Trying to time a stock based on news headlines is like watching a baseball game in the 3rd inning and, using only the scoreboard, trying to guess the winner.
You’re missing all the important factors that affect the outcome of the game: players up to bat, on deck, current winning/losing culture of the team, pitchers available in the bullpen, how the starting pitcher is feeling, etc. The score, or stock price, is just a byproduct of all these variables combined.
So, as Tesla and the coronavirus relate to your investments, ignore what you read. Instead, trust your investment strategy (hopefully you have one that isn’t buy and hold forever until you feel like selling), stick to your process, and leave your emotions out of it.
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