That Unsettling Feeling

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 the greatest chance of achieving my goals in life — 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. The ability to stay the course (however unsatisfactory that may feel) is a super-power, and there is no evidence anyone can reliably forecast when volatility will end and to what extent stocks will decline.

But there’s good news if you have a well-designed, low-cost, and globally-diversified portfolio. Your allocation to risk assets should have been a decision made carefully and intentionally with one thing in mind: to help you reach your goals with the lowest amount of risk. A margin of safety should be built into your plan — none of the money invested in the markets today should be needed for short-term goals.

If you don’t have a well-defined, rules-based plan in place, you may be more inclined to make emotional decisions during 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.

In the short term, market movements can be heavily influenced by fear and computerized trading; in the long term, performance tends to reflect broader-based economic trends. 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. And if you have colleagues, friends, or family members distressed about a recent decline, we would be more than happy to meet with them and help them better understand what market declines mean for their goals. Thanks for reading — be safe out there!