Skip to content
Home » Blog » Risk Tolerance Lessons From Covid-19 – Bill Schantz

Risk Tolerance Lessons From Covid-19 – Bill Schantz

Risk Tolerance Lessons From Covid-19 - Bill Schantz

The Covid-19 pandemic has not only been a health crisis but also a financial one, affecting markets and investors globally. As the virus continues to ravage the world, it has taught us some valuable lessons on risk tolerance. Below are some of the key takeaways from Covid-19, as per Bill Schantz, that investors should consider in their decision-making.

Bill Schantz Lists Risk Tolerance Lessons From Covid-19

The Importance of Diversification

Diversification is essential for managing investment risk, and the pandemic has highlighted this, says Bill Schantz. The virus has caused significant disruptions in various sectors, including tourism, retail, and entertainment. These disruptions have led to some industries experiencing significant losses, while others, such as healthcare and technology, have continued to thrive.

Diversifying one’s portfolio across different sectors, industries, and asset classes can help mitigate risks, as any losses in one area can be offset by gains in another. Therefore, investors should consider diversifying their portfolios to reduce their exposure to market volatility.

Staying the Course

Investors who sold their shares in panic during the initial market drop in March 2020 missed out on the significant gains that followed. As the markets rebounded, those who stayed invested in the market continued to benefit from the market recovery. Staying the course and sticking to one’s investment plan is crucial, especially during turbulent times.

While short-term market fluctuations can be unsettling, investors should not make hasty decisions based on emotions. Instead, they should focus on their long-term goals and investment objectives and stay invested in the market.

Building an Emergency Fund

The pandemic has highlighted the importance of having an emergency fund. Covid-19 has impacted many people’s livelihoods, with some losing their jobs or experiencing pay cuts. Given the uncertainties surrounding the pandemic, having savings as a safety net can help one weather any financial storms that may come their way.

Experts recommend having three to six months’ worth of living expenses set aside in case of emergencies. Investors should consider establishing an emergency fund to help them navigate any unforeseen financial challenges.

The Role of Active Management

Passive investing has gained popularity over the years, with investors turning to low-cost index funds to access the market’s returns. However, the pandemic has shown that active management can have its advantages. During the market downturn in March 2020, some active fund managers were better positioned to navigate the crisis than passive investors.

According to Bill Schantz, active management can offer a level of protection during market downturns, as active managers may have the flexibility to adjust their portfolios to reflect market conditions. Investors should consider combining active and passive investing to achieve a diversified portfolio that can better withstand market disruptions.

Bill Schantz’s Concluding Thoughts

The Covid-19 pandemic has been a challenging time for investors globally, highlighting the importance of risk tolerance. Diversification, staying the course, building an emergency fund, and the role of active management are some of the key lessons that investors should take away from the pandemic. According to Bill Schantz, investing in these lessons can help one navigate market volatility and achieve long-term financial goals. As the world continues grappling with the pandemic, these lessons will prove invaluable in navigating an uncertain financial landscape.