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Investors should heed the viral wisdom of a football manager

“It’s not important what famous people say. You have to speak about things in the right manner. Not people with no knowledge, like me, talking about something.”

This advice (or non-advice) should be helpful for all of us. But it should resonate particularly strongly with investors as financial markets crumble.

A trader works the floor of the New York Stock Exchange as markets tumbled last week.

A trader works the floor of the New York Stock Exchange as markets tumbled last week.Credit:Bloomberg

Global sharemarkets have wiped out all of their gains for the year and slid firmly into correction territory. The local S&P/ASX 200 is no exception, tumbling 13 per cent from its record high on February 20. Last week the bourse shed $210 billion in its worst five-day period since the global financial crisis.

While this has taken place, economists and fund managers have been more than happy to come forward with predictions on how bad the virus might be, from a market and societal perspective, and offered advice to policymakers on what their response should be.

The reality is this is just noise. This is a public health crisis, not a financial markets crisis. And it’s a crisis that will ultimately be solved by scientists, doctors and public health officials, not politicians or central bankers. Let alone fund managers or football coaches.

None of this is to downplay the seriousness of the coronavirus, of course. In fact, quite the opposite. The Australian government has activated its pandemic response and this week extended its existing travel ban to South Korea. As the head of the World Health Organisation put it overnight: “This is not a drill.”

The point is, in uncertain times like these and amid growing misinformation online, it is important to listen to the right people with the right credentials. Doing otherwise can lead to bad outcomes, such as people hoarding toilet paper during the spread of an infectious virus that causes respiratory illness.

It could be tempting at this point for someone like me to argue that the best thing for most ordinary investors to do right now is sit tight. If superannuation is your primary savings vehicle and you are making set contributions that flow into shares or other securities “dollar-cost averaging” should reduce your risk, at least in theory. Put simply, it means you buy more when prices are low and less when prices are high.

But I am a business journalist. You should instead talk to a qualified financial adviser.

As Klopp put it: “People with knowledge should tell the people to do this, do that and everything will be fine. Or not.”

John McDuling is the Business Editor of the Sydney Morning Herald and The Age. *He is also a Liverpool fan.

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