A story about how a self-regulated investor with a 40-year investment history was affected by a virus and broke the psychological defense line in 40 days.

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Editor’s note: The new crown virus not only poses a huge threat to human health, but also causes a huge secondary disaster to the economy. When the U.S. epidemic took a turn for the worse, the U.S. stock market, which was 10 years old, began one of the worst crashes in history. Facing the free fall, what choice should investors make? I believe that everyone’s heart will suffer deeply. James B. Stewart, who has a 40-year investment career and is a self-disciplined investor, is confident that his powerful heart was defeated by the virus in 40 days. The original article was published in the New York Times, with the title: I Became a Disciplined Investor Over 40 Years. The Virus Broke Me in 40 Days.

It took me 40 years to become a self-regulated investor. It took me only 40 days to be defeated by the virus.

That was the morning of Thursday, March 19th-(US) New Crown Virus outbreak enters its fourth week. A day ago, the Dow Jones Industrial Average fell just below 20,000 points and then fell 700 points. The index plummeted by 30% in one month, the largest decline ever, and even worse than during the Great Depression.

This fall is disgusting. However, according to the rules I have made for decades, I know that the time has come to buy. But I have to log in to my stock account first. After logging in, the first thing that catches my eye is the current market value of my portfolio.

I was quarantined in a wild New York country farmhouse at the time, and I have n’t seen my account for days. Now I don’t want to watch either.

I decided to look at the weather first. Then reply an email. After an hour, I did nothing.

I’m just paralyzed.

I have been taking those stocks for almost 40 years, and I have survived four crashes, and have even risen back.

So I should be ready. But, looking back over the past few weeks, I realized that most of the tried-and-true rules have violated themselves. Bad news keeps coming up, optimism and despair are intertwined, my daily life is subverted,I let emotions shape my decision. I did it again this morning.

Unfathomable fall

In the summer of 1982, after I had enough money, I bought a stock mutual fund for the first time in my life. My father is the local sales manager of NBC. He has always been an avid believer in the stock market, and he has repeatedly instilled that belief in me.

It turns out that 1982 was a good year to buy, but I didn’t realize it at the time. For many years, I have enjoyed the positive reinforcement brought by the steady rise of the market. From time to time, I like to look at my mutual funds in the newspaper. In the next five years, the market tripled.

I went to see my brother on October 19, 1987, while he was studying for a semester in France. When I left the hotel in Strasbourg the next morning, I noticed that the headline on the newsstand reported that the Jones Industrial Average had fallen by “23”. I’m curious why the US market is making headlines in France. Take a closer look, there is a percent sign behind the original 23. The Dow fell 508 points in one day. In terms of percentage, this is the worst day ever for the US stock market.

I can’t wait to sell my stock right away to save my poor savings. But I am too far away from the United States, I have no choice but to hold on.

After returning to the United States, the market seems to have stabilized. But the volatility continued quickly. After experiencing one of these declines, I panicked and sold all my funds.

By September 1989, the market had made up for all the losses. But I can only watch by, waiting in vain for a good time to come back again.

I swear never to be in panic again. I made a rule- Never sell when you are down -Corollary: Never buy when you are up .

Driven by technological prosperity, the next decade has entered a record bull market, which has helped me a lot. That decade was even more intoxicating than the 1980s. While in the gym, I often hear personal trainers bragging about their favorite technology stocks.

The concept of diversification is largely unknown to me. At the beginning of 2000, when the tech bubble burst and the stock market crashed again, I bought and persisted. I watched my investment shrink. Then I stopped paying attention to the stock trend, which gave me at least some psychological comfort. I put my monthly paper bill in the trash without leaving it.

But at least I adhere to the principle established in 1987: don’t sell.

After a two-year bear market, I adjusted my strategy. I think that if I buy every time when I fell 10% from the previous high (the standard definition of the market correction), and then buy again every time I drop about 10%, then I will never be in the cycle ofBuy at the highest point.

I do n’t think it ’s timing, because I do n’t make predictions about market movements. My strategy is a change to the widely used portfolio rebalancing approach (selling certain asset classes and buying other asset classes to maintain a stable allocation.)

I put this system into practice during the 2008 financial crisis. Looking back at the market crash in October of that year, when people boasted that they had the foresight to run out first, I said they were shocked when they were buying.

My timing is not perfect. The market has fallen 10% five times, so I have many opportunities to increase my stock position. The last time was in March 2009. In hindsight, buying a 10% drop for the first time was a stupid choice because the market has since fallen another 40%. But even with those premature buys, I was still able to benefit from the record bull market that ended this month. Back in 2009, I didn’t have to worry about returning to the market. I’m already inside.

What will be another virus threat?

Since then, the 10% correction has only occurred 5 times, and each time has been a buying opportunity for me. There has never been a 10% drop. The last revision was at the end of 2018. As my account accumulated more and more cash, I started thinking about when to give me another chance to buy. I became impatient. On February 19, the S & P 500 closed with a record high. No one seems to see signs of a bear market or recession, even if the price-earnings ratio has reached record highs, and even a strange virus has begun to spread.

Until a week later.

The stock market started to fall, but it was very slow at first, and then rose back slowly. By February 25, the S & P 500 index had fallen by 7.6 percentage points from its peak.

From a financial perspective, I’m not worried about this virus. China’s infection situation is stabilizing. There are only a few cases in the United States, most of which occur in a nursing home in Washington state. Everyone says that the United States has a better health care system, better air quality, and more effective ways to prevent the spread of the virus. As an investor, I have experienced many virus panics, including SARS, MERS, swine flu, and Ebola virus. The spread of these viruses has not significantly affected the US stock market. Even the deadly AIDS epidemic has little impact on the broader economy or a booming market.

So on February 25th, I started eagerly buying the stock target (a broad-based index fund) that fell 10%. The suppressed desire and optimism overwhelmed my trained strategies. I did not consciously make a decision against it. I was so anxious to grasp this fleeting “opportunity” that I didn’t even think about it.

The stock market fell a bit the next day. Then, February 2On the 7th, the S & P index fell nearly 5%. Now, the market has officially corrected, the fastest time ever, a 12% drop from the previous week’s peak. At this time, the new crown virus has swept the world, including the United States.

I realized I should wait. I feel stupid and guilty for breaking the rules. I swear this is no longer the case.

The biggest drop since Black Monday

But I think I’m really smart next Monday. Given rumors that the Fed will cut rates, Standard & Poor’s soared nearly 5 percent.

Unfortunately, the climax is always short. By the weekend, Standard & Poor’s had erased Monday’s gains. Now I am also worried, but I am not an infectious disease expert. I think the stock has already priced the risk. All I know is that the market is now in deep correction, so I bought more.

My first buy may be too early, but now I am back on track and following my manual. With so much uncertainty, I felt like I was in control of my destiny.

That was the last time I bought it, it felt like I was seizing a fleeting opportunity. This quickly became the source of my extreme anxiety.

On the first weekend of March, headlines covered the outbreak of the virus in Italy. Photos of the empty square make the situation worse. The seemingly distant threat now seems within reach.

If things aren’t bad enough, Russia and Saudi Arabia have decided to launch a battle over oil prices when demand collapses. The plunge in oil prices has weighed on the entire energy sector.

The market will be bad on Monday. I expected it in advance, but the situation was worse than I expected. The chaotic transaction even triggered the fusing mechanism. The S & P index fell 7% on the day, the biggest drop since Black Monday in 1987.

I took the courage to glance at my account. The numbers shocked me: its decline has far exceeded the average level of the US stock market. My International Equity Index Fund is down 20% from its February peak, and the value of emerging market funds has shrunk by a quarter.

At this point I think back to 33 years ago, when I was panicking about the headlines I saw in Strasbourg. I managed to remind myself that the long-term trend of the market has always been upward, and the short-term fluctuations are only temporary. When the market fell, it was time for the city to consider buying more stocks–but it was much earlier than I had hoped or expected.

On Thursday, March 12, President Trump began issuing a ban restricting most air travel between the United States and continental Europe. After the global economy has pressed the pause button, the stock market has plummeted even more than Monday. . S & P is down 10% and is down 27% from its peak a few weeks ago.

According to my own rules, it is time to buy.

ThisI barely noticed. I’m busy cancelling my vacation plans for the Virgin Islands next week and starting to figure out how I would be isolated, even a few days ago, it seems unimaginable.

To make matters worse, a friend of mine in Spain, a person in my 40s who I just visited in November, became infected with the virus. He has been admitted to a hospital in Madrid, and he has not yet woke up.

I worry about the spread of this disease. I have no time to take care of the rapid decline in the stock market or our stock equity.

Record fluctuations

My trading strategy is not a rigid requirement, but a rational manifestation. It’s okay to miss a point or two, or if the timing is a bit inappropriate, or to prioritize things (as it is now). Two other friends told me they were also infected with the virus.

However, in the next few days, as I took a long walk on the country road and started thinking about these ensuing events, I realized that my excuse for inaction had been used up. I know I should buy again, and the S & P is still well below my 20% target. But transaction volatility has never been seen before. The S & P index has recorded a record fluctuation of more than 4% for seven consecutive trading days.

Friday, March 13, stocks rebounded late in the afternoon as Trump promised new measures to curb the virus and boost the economy. At the close, the S & P 500 was almost 20% below its previous peak. I still stand still.

Fortunately. The market crashed again on Monday, erasing all Friday gains. The Dow Jones Index fell below the 20,000-point milestone for the first time in three years. The market is now down 30%. It’s time to buy.

After passing 20% ​​of the buying “opportunities”, I know it’s time to take a look. But I will not do it while the market is still free-falling. Either way, I still haven’t logged into my stockbroker website.

The next day, the stock market rebounded. I felt a strong temptation to buy, and there was always a voice in my heart saying that the worst case might have passed. I feared that I failed to follow my strategy again and missed the bottom. But the 30% window has been closed, and I remind myself that my rule is never to buy when it is rising.

The good news came the next day: New infections in China had dropped to zero. Even so, the market still fell in the morning session, triggering my buy target at 30% again. This time I decided to do it.

But I still froze. I looked at news, weather, and email. I told myself it was ridiculous. Whether I look or not, the value of my portfolio will not change.

So I went to see it. My stock situation is terrible, but the shock is not as severe as last time (perhaps because the percentage of the decline now is not so much). With some interest and dividends accumulated in recent years, I still have enough on handcash.

So I bought it.

When I buy, I ca n’t say it ’s emotionally high, but I think it ’s better than a few weeks ago, at least in terms of my personal finances. I have the courage to face reality, no matter how cruel it is. I proceed as planned. If I need another 10% to cover my position, I also have more cash.

My renewed confidence survived the next downturn, and that happened the next day.

“Shame, stupid, as if you messed up”

This week, I introduced Frank Murtha, a behavioral finance expert, a managing partner at consulting firm MarketPysch, to my recent investment woes. He said nothing I told him was anything unusual, even for experienced investors.

He said, I don’t want to face my investment portfolio is actually very common. “It’s painful to see your money slowly diminishing. The pain is not just because you are poorer. You also feel embarrassed and hate yourself for being so stupid as if you messed things up. Separating money from your ego Is one of the trickiest things. “

He recognizes my courage to face up to reality and buy again. He said: “Taking action is the most powerful way to relieve anxiety. In order to meet the emotional need to do something without putting your finances at unnecessary risk, you can take smaller actions.”

Stocks are one of the few assets that are cheaper and psychologically less willing to buy. “Every decision to buy will be negatively affected,” Murtha said. Even he himself missed the huge buying opportunity in March 2009. “I was too scared,” he said.

At least I didn’t make what Murtha thought was the most serious mistake, and that was to sell during a crash. He said: “This kind of injury is real. Once sold, the emotional impact will be against you. If the market declines further, it will only confirm your fear. If the market rises, you do not want to buy just after the sale. Then it gets farther and farther away from you. Everyone doesn’t realize how difficult it is to buy again. “

The market is soaring. I’m not happy.

All my past experiences have not prepared me for the speed of this market crash. In March 2000, after the stock market peaked, the market continued to fall until October 2002, which is two and a half years. The last bear market started in 2007 and lasted for 17 months. How long will this bear market last? no one knows.

The fact that I have gained courage: During the previous bear market, the S & P index fell no more than 50% of its 2007 peak. Even during the Great Depression (the worst bear market in history), Standard & Poor’s fell by 86%, but never dropped to zero, a little comfort, maybe. After going through such a dramaAfter a strong decline, the market not only recovered, but finally reached a record high.

There is some good news this week. My Spanish unconscious friend woke up. The doctor said his recovery would be slow, but they were optimistic.

The market surged on Tuesday, followed by two consecutive days of gains. But I’m not happy this time. The biggest rally sometimes occurred during the worst bear market.

My next target is when the S & P index reaches 40% of its highest point. I may buy again soon.

Translator: boxi.