It’s a natural tendency to worry or panic about potential share market falls when a severe geopolitical event occurs, such as that of Russia invading Ukraine recently.
However, it’s important to keep a clear head and analyse what the direct impact the event might have on the earnings of the shares you own.
For example, are the earnings of any New Zealand listed companies likely to be directly affected? Probably not. Of course, there may be indirect effects, such as rising fuel and food prices, and these need to be taken into account. However, a wholesale rush for the exit to sell shares at a loss right now may not be the right course of action.
Often when a negative event takes place, investors quickly price in all the potential negatives that could affect the market. Usually, not all of these negatives occur and prices begin to rise again.
As it so happens, the US market actually lifted slightly on Thursday night as investors took the view the likely impact on much of Europe could persuade the Federal Reserve to slow or delay its proposed interest rate rises.
Investing in shares is a tricky business at the best of times and the markets are obviously going to be volatile for some time.
We encourage you to take a measured approach to weed out the weak shares in your portfolio, hold on to the stronger ones and keep your eyes peeled for the bargains that will ultimately be presented by events.