Coping with Volatility
By Laura Reeves
These past few months have been quite stressful, to say the least. Overall, there is more uncertainty with the markets than we have experienced in many years. All while juggling other unknowns, such as when will the volatility subside, will we be heading into recession, and of course, inflation which is embedded within all facets of our lives. Navigating through these stressors can cause one to get a bit queasy at the very least. I for one have a staple of TUMS and piggyback that these days with some Pepto Bismol, but this is no cure all.
Continuous hypersensitivity to the “market noise” without any reprieve is not good for anyone’s mental health. From an investment point of view, being so attuned to the daily gyrations without any long-term perspective can prompt hasty decisions. In fact, statistically speaking, the do-it yourself investor, who has no guidance from a Financial Professional, typically tries to time the market, chasing the highs and selling at the lows, ultimately causing a portfolio lag of up to 4%, comparably speaking. A few thoughts about this; though volatility is frightening, let’s not confuse this with risk. Risk is the possibility of permanent loss which can only occur if a position is sold. Volatility is a concern, but pullbacks are a healthy part of the market cycle. To put this in perspective, I equate it to a healthy market cycle which in order to remain healthy, it needs to breath. It has exhaled for many years (a bull market). Now the market is taking a much-needed breath. Lastly, if we look back, we have seen many drawbacks, which again were not comfortable times, however each time the market regressed we always saw the market recover. The key now is patience, keeping your long-term goals in mind and rebalancing, when needed. Though I feel we might not be past the turbulence, with a little TUMS, we’ll get through this.
On a last note, I wanted to provide you with some additional ways to cope through these distressing times. I find that one’s financial health is correlated to one’s mental health. On that note, I have dedicated my newsletter to offering some ways to improve both. You can check it out under the Resources tab, then click Newsletters. Please feel free to subscribe going further. Thanks for reading, hope you find my blogs and/or newsletters impactful.
"For the investor who knows what he is
doing, volatility creates opportunity.
“John Train"