130 - How to invest during a crisis?

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.