Mental Models discussed in this podcast:
- Stress Testing
- Time Horizon
- Stoicism
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Show Outline
The full show notes for this episode are available at https://www.diyinvesting.org/Episode130
Key Concepts for Investing during a Crisis
- Stress Testing - Bankruptcy Risk?
- Goal: Survive
- Stress test businesses not stocks
- Focus on Fundamentals
- Long-term is where all of the value is at
- The next 1 or 2 years is only 10-20% of the value most of the time.
- War somewhere is not inherently a crisis for your portfolio
- Are your specific businesses being affected?
- Land war in your country?
- Destruction of infrastructure owned by your companies?
- Sanctions against your companies?
- There has been almost constant war for the entirety of the last 100 years somewhere in the world
- Doomsday Scenarios
- It is usually worth betting on optimistic outcomes
- If you're wrong, you likely won't be around to deal with it. (Nuclear war)
Summary:
The Russian Invasion of Ukraine has created a situation where three crisis grip the world: War, Inflation, and COVID-19. How should investors think and act during such a crisis?
Stress test your portfolio. Focus on the Fundamentals. Does the war affect you directly? Avoid doomsday thinking.
