Andrew Hallam
25.03.22
What Russia’s Aggression Means For You and Your Portfolio
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When Russia’s president, Vladimir Putin, ordered his military into Ukraine, he took a fire hose to a party that he wasn’t invited to. In many ways, it echoes December 1979, when the Soviets invaded Afghanistan. Oil prices more than doubled between January 1979 and May 1980. Stocks slumped 6 percent during the first 3 months of 1980. And more importantly, (just like now) there were cracks in the glasses of global peace.
The Pulitzer prize-winning journalist, Anne Applebaum’s assessment of Europe in her 2021 book, Twilight of Democracy, The Seductive Lure of Authoritarianism, claims totalitarian figures are gaining ground in global politics…including Europe. That, combined with what this might mean for your investments, is more than enough to make plenty of people sweat.
This could have you wondering, “What should I do right now?”
You can’t control how stocks will perform or whether Putin (or anyone else) will spray more fuel on a global fire. So, control what you can control and accept what you can’t. This might sound like I’m suggesting a head-in-the sand solution. But let me explain why I’m not.
First, don’t shift your money around to protect against forecasted losses. Most forecasts are wrong. Plenty of people forecasted stocks would fall in 1980 when the USSR invaded Afghanistan. During the first three months that year, US stocks fell 6 percent. Anyone taking a cue from the war and falling markets to alter their portfolio allocation to limit their losses would have been disappointed. By the end of the year, the S&P 500 had a calendar year gain of 32.5 percent.
That doesn’t mean stocks will earn positive returns in 2022. They might. They might not. But if you guess they’ll drop further, act on that guess, and end up being right, you’ll be tempted to guess again. And if you do, you’ll almost certainly be wrong. Speculation is typically the enemy of a sound investment policy. So, stick to your goal allocation and don’t fool around.
Worrying about an escalated war is as fruitless and unhealthy as fretting about your money. However, there is something you can do. First, draw strength from realizing that the world isn’t getting worse. Sure, we’re in a bad patch now, but progress isn’t linear. And overall, when measuring progress with a longer stick, the world is getting safer…and better.
That’s why we shouldn’t believe we can’t make a difference. Decade by decade, we are making progress, and that should give us strength to know that our efforts aren’t in vain. As for the crisis in Europe, several of my friends have “rented” AirBnBs in Ukraine. Of course, they aren’t flying there, but they have connected with the owners and received some heartfelt messages about how the owners are using the money to help other people.
It’s easy to be cynical, but from my experience, most people in the world are good, and willing to help when they can. My friends aren’t saints, but one of them raised money to buy a bulletproof vest for a humanitarian aid worker they personally know. Another friend of mine (a Ukrainian living in the US) helped raise money to buy a needed ambulance. NPR listed several more conventional ways that you could help, here.
So, when it comes to your portfolio, stay the course and maintain your asset allocation. If you have the money, continue to add it. Ignore all forecasts. Statistically speaking, accepting what you can’t control will likely be better for your long-term wealth.
As for trying to help others, that’s only thing you should do. It could change or save someone’s life, making it the best thing we do all year.
Andrew Hallam is a Digital Nomad. He’s the bestselling author Balance: How to Invest and Spend for Happiness, Health and Wealth. He also wrote Millionaire Teacher and Millionaire Expat: How To Build Wealth Living Overseas
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