Coronavirus impact on the stock market – a comment from Lifeplan’s CEO Karl Erlandzon

There is no part of society that is unaffected by the current coronavirus outbreak, and we all need to do what we can to reduce the spread of infection. What follows the outbreak is a period of economic turbulence, which, of course, creates great concern for companies as well as individuals.

At Lifeplan, we’re closely monitoring how the financial markets are affected. The decline of around 30% that we have seen is not due to irrational panic, but due to actual expectations of difficult times. The fact that the outbreak will have negative consequences is something the market immediately takes into account, and that’s why market developments can change quickly when new information emerges. What people should remember is that the market immediately prices new information in the share prices, and no one can predict how the prices will develop in the near future.

Therefore, it is not worth trying to predict the market

Research shows that fund managers who try to predict the market and increase or decrease the risk, on average, depending on their expectations, lose in risk-adjusted returns compared to a passive By and Hold strategy. A fund manager would have to guess right in 70% of cases for this to be profitable. Therefore, the best strategy for professional managers is to retain the holdings they have and avoid trying to predict the market’s ups and downs.

Fear leads to a common investment mistakes

The same applies to private individuals who, of course, have even worse chances of predicting the market’s developments. A common investment mistake private individuals make is completely exiting the stock market after a major downturn, and then returning after the market has reversed. A clear example of this was the financial crisis in 2008, when many private individuals left the stock market after the downturn and then were too late to enter again when the market turned. Although it goes against your gut feeling, it’s wise to ride things out and not overreact in the event of turbulence.

We contact our users if they need to adjust their savings

That is why we recommend to our clients that they keep the investments we have recommended. We are continually analysing the market, and we will contact those who we think should make adjustments to their savings.

Lifeplan is adapted to your circumstances

Nevertheless, if you, as a Lifeplan user, want to lower the level of risk in your pension savings, you can do so easily by logging in to Lifeplan and changing your risk propensity to “Very low”. Then, we will provide an investment proposal for long-term savings, tailor-made for those who want to be extra careful.

If you have any questions, you’re always welcome to contact our support at 031-10 98 70 or e-mail support@lifeplan.se.

We hope this information has provided you with a clearer picture of how you, as a pension saver, should think with regards to the market collapse. It will take some time after the virus for things to settle, and until then, we want you to be able to focus on other things, while we, at Lifeplan, focus on your pension savings.