We all know the markets are turbulent at the moment. It’s also well documented that losses tend to affect even seasoned investors more than gains. So if you’re finding that your
normally strong mindset is being tested during this time – you’re not alone!
Here are 9 important things to keep in mind during this period.
1. Worrying about the markets isn’t going to change anything.
2. History has shown that the financial markets have always recovered. Don’t lose sight
of the overarching potential upward trajectory of your assets as compared to the
short-term turbulence you may be experiencing right now.
3. If you keep contributing to your accounts, you have the potential to buffer losses. For
example, if you keep adding 1% per week, even if the market is down 10%, you
could potentially buffer the effects of this in just 10 weeks.
4. Don’t forget that when the market is down, based on dollar cost averaging, you’ll be
able to buy more shares at cheaper prices and that’s considered a good thing. This
should provide comfort that you’re well positioned for when the market recovers.
“The best chance to deploy capital is when things are going down.” –
You may want to consider the following:
5. If you have a sound investment strategy, stay focused on the number of shares
you’re accumulating rather than the value of your accounts.
6. The likelihood of the capital markets dissolving is minimal.
7. If you’re not retiring anytime soon, or if you don’t need to sell to start taking income
streams or lump sum distributions in the near future, any dip is unlikely to have an
immediate impact on you. Stay focused on the long game.
8. Keep your attention on making more money, not on avoiding losses. This will keep
you more resilient, and help you stay focused on what you do best.
9. It’s not a loss unless it’s realized! It’s a temporary dip in the market. Just accept that
you might be temporarily down on paper and that as long as you’re confident the
market will recover, everything should be fine.
Here are the practical actions I recommend be considered for the more risk averse during
times of uncertainty.
– If it’s causing you anxiety or other intense emotions (for example, anger or upset)
when you look at your accounts, don’t look at them. If you must look, focus on the
percentage change in the markets over the dollar amounts in your accounts.
– Try not to go into a freeze state where you cease contributions or even worse, sell
based on fear. These are anathema to keeping yourself in the best position for your
long-term wealth building.
– Don’t be a “weak bull” and exit the market entirely. History has shown that if you miss
out on just the top 10 trading days, you can miss out on half the annual return. If you miss out on the top 20 trading days of the year, your return can go from positive to
negative. This gets worse the longer you’re out of the market for. (Source: JP Morgan)
“The most important quality for an investor is temperament, not
intellect.” – Warren Buffett
Consider the following:
– If you’re a newer investor, you’re likely to experience greater loss aversion than if
you’re seasoned, but experience has shown that the longer you stay in the market
the more comfortable you’ll become.
– Keeping a cash buffer helps prevent you having to sell when the market is down. If
you’re having to sell when the market is down, that money shouldn’t have been in the
– Have a proper financial plan in place. You shouldn’t need income from your assets
for at least 6 months.
– Every investor is different and you will need to consider your own needs, objectives,
time horizon and tolerance for risk.
If you’d like to talk to a member of my team, just schedule a call with us here.
Here’s to your wealth,
Michael W. Hanna
Michael Hanna is a registered representative of and offers securities, investment advisory and financial planning services through MML Investor Services, LLC. MEMBER SIPC. WWW.SIPC.ORG. 420 LEXINGTON AVE, SUITE 2510, NEW YORK, NY 10170, (212) 578-0300.
Representatives do not provide tax and/or legal advice. Any discussion of taxes is for general purposes only, does not purport to be complete or cover every situation, and should not be construed as legal, tax or accounting advice. This article is educational and is not advice or a recommendation for any specific investment product, strategy, or service. The views and opinions expressed are those of Michael Hanna only. Any examples used are generic, hypothetical and for illustration purposes only. Investing involves risks, and past performance is not indicative of future results. Clients should confer with their qualified legal, tax and accounting advisors as appropriate.