As the stock market sinks, many investors get antsy. They seek comfort wherever they can find it. For these people, there are plenty of financial gurus who dish out pearls of wisdom to tamp down anxiety. Perhaps you’ve heard some version of:
- Cheer up! Now you can buy your favorite stocks on sale.
- This is a healthy market adjustment before it goes up again. Just ride it out.
- Focus on your long-term financial plan. Don’t check your portfolio every day; it’ll drive you crazy.
These remarks are entirely reasonable. They seem comforting. So why don’t they improve our mood?
According to Tim Witham, a licensed financial planner in Villa Hills, Kentucky, “talking at somebody is the worst thing you can do as a financial adviser.” “The simple phrase ‘cheer up’ is ineffective. Alternatively, “These things happen.” The markets decline. It’s not a huge deal. However, it is significant.
Some financial advisors choose more imaginative, upbeat activities or observations over the tried-and-true advise, even if it is sound, when markets are shaky. Witham likes to show, for example, how long it has been since the market last hit its present price. “I’ll show clients how far back we can go on a chart to see where the current levels were a peak,” he stated.
Then, long-term investors conclude, “That’s not so bad.” Eight months later, I’m back to where I was, which was and is a significant improvement over where I started.
Witham expands the discussion as well. He redirects the attention of anxious clients who might continue working on their portfolio. “Advisers can’t make the stock market everything they talk about with clients,” he stated. “They must eventually make the switch and rely on personal belongings. It’s about building relationships. As they talk about more agreeable subjects, a client’s mood should ideally improve.
It may seem illogical to find another strategy to calm market anxiety. However, it works remarkably well. Instead than focusing on your present losses, think about the upcoming negative news. It can be therapeutic to be pessimistic.
According to Justin Pritchard, a certified financial planner in Montrose, Colorado, “when things get bumpy and clients worry, we look at their long-term plan and project out further declines.” “We’ll delete another 20% from their account balance and find that they’re still in good shape.”
The knowledge that much worse things could happen and that the portfolio is built to withstand such a terrible blow can be consoling in and of itself.
Analogies can provide much-needed perspective. By drawing a comparison between a volatile market and something recognizable and relevant, some advisors like to allay their clients’ anxieties.
Trent Porter, a certified financial adviser in Durango, Colorado, remarked, “Investing is like walking up a mountain while playing with a yo-yo.” “The large up-and-down swings are all that are visible if you only pay attention to the yo-yo. But you don’t appreciate how far you’ve come over time unless you take a step back and consider the wider picture.
Daniel Milks, another advisor, favors a driving analogy. According to Milks, a certified financial advisor in Greenville, South Carolina, “you don’t slam on the brakes when traffic ahead slows down.” “You reduce the speed. And you speed up when it starts up again. It’s the same with investing. Market declines are not an excuse to panic and sell. They are an opportunity to adapt, be vigilant, and prepare for the future.
The saying that dejected investors tend to forget the most is “Moods are contagious.” Your perception of the world will be influenced by the people in your immediate vicinity.
You will undoubtedly feel worse than ever about your declining portfolio if you listen to financial “experts” who forecast doom and gloom or converse with pals who are anxious.
You will be influenced by those who maintain their composure and optimism in the face of market declines. They are the greatest mood enhancers, thus it makes sense to look for their companionship during these trying moments.
