Trust Me I’m A Doctor and Stock Markets

Below is my answer to the question online “With the stock market down due to the COVID-19 coronavirus, is it a good time to buy or sell your stocks?/”

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There is an excellent show called “Trust me, I’m a Doctor” on the BBC.

Why do I find the show fascinating? It shows what seems like “common sense” isn’t always true.

It also illustrates that many widely held beliefs are false. I will give you an example.

Frozen vegetables has less nutrients than fresh vegetables right?

Wrong! I was wrong and most people assume incorrectly that fresh vegetables not only taste better, but are healthier too.

The tests done on the show, by academics, found that if you freeze your fresh vegetables one day after you buy them, they retain the vitamins according to various tests they did.

If you keep them in the fridge, they lose some of their “goodness” on a daily basis.

Now what does this have to do with investing? I am not implying that investing is a “hard science” like medicine or biology.

However, we can look at how markets have performed in the past.

We can’t automatically say “just because they have performed in this way in the past, they will in future”, but we can now look at more than 200 years of data.

What does the data say, from countless academic studies?

There is little or no correlation between things like:

  • Stock markets and recessions
  • Stock markets and impeachments
  • Stock markets and wars
  • Stock markets and trade disputes
  • Stock markets and most other events

Stock markets can go up, or down, on all of these events. So the markets can’t be predicted.

If that wasn’t the case, we would all be able to time the market and I have yet to meet one person that can do that long-term.

Always remember, what seems like “common sense” isn’t always true, across numerous domains and disciplines.

In investing, it is always good to buy every month, regardless of whether markets are up or down.

The time to buy and hold is always now, as you never know how markets will perform short-term.

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