How the world’s top investors are responding to coronavirus volatility

March 10, 2020 15:30

Travelling for business

Coronavirus fears have led to extreme volatility in the stock markets over the past month, with the Dow Jones losing nearly 6,000 points in just four weeks, or nearly 20% of its value. This culminated in a 7.8% crash on Monday March 9.

At the same time, the SP500 lost over 690 points (also 20%), and the FTSE lost over 1,800 points, or 24%.

While the volatility has sent some traders running from the markets, many experienced investors are seeing this as an opportunity to snap up sought-after assets at bargain prices.

What are top investors doing with their money?

The Investment Group for Enhanced Results in the 21st Century (TIGER 21) is a US organisation of over 700 investors with at least $10 million in funds.

According to chairman Michael Sonnenfeldlt, the world's wealthiest are not fleeing the market - they are building all-weather portfolios - ones that withstand both bull and bear markets. In Q4 of 2019, members of TIGER 21 held 12% off their portfolios in cash (the highest level since 2013). However, they still have a significant portion of their portfolios in equities - 24% in private equity funds, and 21% in public equities.

They also had 1% in commodities like gold to offset stock market risks.

The benefits of staying in the stock market

The most important point to keep in mind is that investors are not running from the market.

In fact, high net-worth investors who have appeared in media interviews over the past few days have commented that not only is it prudent to maintain some market exposure, but the recent drop in the stock market could also be an opportunity to get assets at a discount.

Goff Financial Group founder Matt Goff commented to the Houston Chronicle that "Many [investors] would view this [volatility] as a long-term buying opportunity."

Meanwhile, San Diego State finance lecturer Steve Nielander told the Los Angeles Times that this could be a good opportunity for investors with some savings to enter the market.

"If you have no money in the market, certainly start thinking about putting some of your money to work. As long as one doesn't need their money right away, it's a good time to invest, and then wait some time for the market to bounce back."

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