It’s OK to feel unsettled and maybe even a bit fearful.
The unrelenting bombardment of news and the velocity in which it travels only adds to our anxiety.
As humans, we can’t help but feel the way we feel right now.
However (you knew a “however” was coming), market volatility provides an opportunity to take a step back and reconnect with the purpose for why we invest in the first place. For me, investing presents me with the greatest chance of achieving my goals in life, which include making memories with family and friends, and positively impacting my community.
Will jumping ship now increase your odds of achieving those goals? While the leap might provide short-term relief, copious amounts of research prove it will likely do more harm than good.
As an investor, the ability to stay the course (however unsatisfactory that may feel or sound) is a super-power, and unfortunately, there is no evidence suggesting anyone can reliably and consistently forecast when market volatility will end and to what extent stocks will decline in value.
But there’s good news if you have a well-designed, low-cost, and globally-diversified portfolio. Hopefully, your allocation to risk assets (stocks) that go up and down was a decision that was made very carefully and intentionally with one thing in mind; to help you reach your goals with the lowest amount of risk.
Not only that, but a margin of safety should be built into your financial plan. None of the money you have invested in the markets today should be needed for any short-term goals.
If you don’t have a well-defined and rules-based plan in place, you may be more inclined to make emotional decisions during market turbulence that you’ll later regret.
As humans, we’re hardwired to react and take action in situations that threaten us. However, the market tends to reward inaction.
Keep in mind that in the short term, market movements can be heavily influenced by fear and computerized trading, while in the long term, performance tends to reflect broader-based economic trends. As investors, the challenge is not to let our minds perpetuate what’s happening in the short term indefinitely, otherwise, we’ll never reap the benefits of sound, long-term investing.
If your portfolio doesn’t reflect your long-term goals, then now is an opportune time to align the two.
If you have colleagues, friends, or family members who are distressed about the recent decline, our firm would be more than happy to meet with them to hopefully provide prospective and help them better understand what market declines mean for them and their goals.
Thanks for reading - be safe out there!