Just a thought: The covid crash

The corona virus had a massive impact on the markets as can be seen
in the chart below. That big dip was a direct result of COVID-19.

Source: finanzen.net

I remember talking about the market crash with another shareholder and as we are quite the optimists on this issue, we concluded the market was not rational at this point. 

After all, it was a fair conclusion to assume, that in the long term, the virus will remain nothing more of an anecdote one day in the near future.
I was not considering, I could be wrong but in hindsight I think I was.

The decision to sell your shares in fear of the pandemic was rational, altough a game most shareowners lost.
When looking at how the pandemic struck the world and how many people lost their jobs, it totally makes sense to sell shares, when one was expecting to loose their job and be unemployed for an unknown timespan.
Even if it means you loose money by selling your shares low.
After all, fulfilling urgent needs in the present is more important than earning a greater profit in the future.

In times where more and more banks charge negative interest rates for the money stored on ones account and retirement is only possible viá investing, it is a bad idea to leave too much money on the bank or in cash.
As a result a lot of people put too much of their savings into investments and too little as an emergency reserve (if possible, one should have savings that can support their lifestyle for 2-3 months at least).
Of course the crash was not only a result of illiquid private investors but also of automatic robo advisors and institutional investors. 

Even Buffett sold in the crash. 

Nevertheless, this event was the ideal point for big investments. Mainly because there is no real reason to think that the people would stop eating, drinking, using fossil fuels (despite the announced "green deal", sorry but everybody knows Ms. Von der Leyen's deal is nothing more than a paper tiger and you one can only react with cynicism when something of that order comes from her mouth).

The only scenario where we would not see a recovery for many areas would a worldwide mass dying (in which case one has other issues to deal  with than the stock market) or at least a change if the governments of this planet really focussed on a green revolution, which I would welcome but let us be honest to ourselves. Not many people I know of want to resign from their current lifestyle.

So in the near future their will propably not be a big change of things other, than that monopolies get stronger and some companies will not survive the halted cashflow but fundamentally the race goes on and on.

So the takeaway is:

-The current political and financial situation pushes a lot of people into the market

-Always keep an emergency reserve as a private person. 

-Decisions such as this can be rational
-For advanced traders with a longer time horizont and cash reserves, this could be a pattern easy to recognize. Worldwide pandemics suck but they will not be the end of the world and of they become the end of the world one would worry about that, rather than focusing on stocks...
-The Buy and Hold strategy with cost averaging effects should work very well in scenarios like this as well
-Stay optimistic in the long run!