Some Perspective on the Greek Debt Crisis

If you’re wondering whether there’s something that you, as an investor, should be doing in response to the Greek crisis, here are some points to bear in mind.

First, as always, we don’t know what the future holds, for Greece or anywhere else. Even more to the point, we don’t know how the market will react to whatever does happen in Greece. This is why we advise those who already have a carefully planned, globally diversified portfolio in place, to keep that portfolio in place (unless your own long-term objectives or circumstances have changed).

The popular press or those who are transaction-based financiers might be tempting you to react to current events by buying this or selling that. They may be well-versed in financial economics, with impressive credentials and seemingly convincing reasons for why it’s time to act now. But if we eliminate the fancy trappings of their arguments, we’re left with the same essential evidence: It’s not good or bad news that sets future market pricing, it’s whether the next news is better or worse than the market has been expecting.

Peer into your crystal ball all you want, but an unknown reaction to an uncertain outcome is inherently unpredictable, no matter what we know now.

For some additional perspective:  How does Greece compare relative to the biggest stock in the world right now, which is Apple?  If you view this chart of World Equity Market Capitalization as of 12/31/2014 by Dimensional Fund Advisors, you will see that you can fit Greece (plus a few more countries!) inside of Apple with plenty of room to spare.  Greece is only a small part of a globally diversified portfolio.

Additional Reading:

• The New York Times has been running “Greece’s Debt Crisis Explained,” updating it regularly as events unfold.
• Letting Go of the Why by A Wealth of Common Sense
  “Even if you know the Why, you still don’t know what will happen. And if you manage to somehow know the What, well you definitely can’t know the When. The good news is, knowing these things aren’t crucial for good investing. Conversely, searching for them in vain, with money on the line, can be highly detrimental.” by Josh Brown
• Independence Day?: “Greferendum” on July 5 Rocks Marketsby Liz Ann Sonders, Charles Schwab
  

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