Again, over the last few weeks, the news has been rife with stories about the threat of a recession and stock market volatility. As a practitioner, I want to start by saying ~ I see it and no, you're not alone if it affects you, it affects me too. Because we'd all prefer a continuously growing economy and stock market right?
But just like in the movies, we don't always get the perfect sunset love story, life comes with ups and downs. If those ‘downs' that we've seen a little bit more of as late are affecting you, here are 5 tips to help you through.
- Focus on the big picture. When thinking you want to react to short term things, shifting your thinking to the long term can help give a new perspective.
- Time is money, when do you need yours? This is a key question to consider and is the foundation to building a portfolio that is right for you. If you don't need the money in the next few years, you still may be better off with more stock exposure. If you do, now may be the time to reconsider your investment allocation.
- Realize, as investors there are many things we can control, and return is NOT one of them. What you can control is how you're invested, if you're adding to those investments, the cost of those investments, the time until you need the money and most importantly how you react to varying market environments. No, its not a guarantee that the return will come if you focus on those other things but with patience and good practice, it can most assuredly help. In J.P. Morgan's June 2019 Guide to the Markets there is a telling slide that illustrates the difference in annualized rates of return between a moderate portfolio and that of an individual investor. It's a 3.3% difference PER YEAR over a 20 year period! What could YOU do with an extra 3.3% per year?
- What history tells us. Bull markets have lasted longer than bear markets and growing economies have lasted longer than recessions. Obviously history is no guarantee of future results but when we are amidst a time of uncertainty, it's easy to loose site of the fact that the market more often than not can be an option to help us grow our bottom line, but we need to be invested in it for that to happen. They say it's not "timing the market, its time in the market" that can make the most impact.
- And finally, turn off the TV (or that radio) and log-out of the computer. Go for a walk, do some yoga, meet a friend for dinner. If you've got a plan in place, do yourself a favor and put the worrying aside. It's important to be aware of how you're invested, but watching it or the markets too closely can actually do more harm than good.
If you're not sure where to start, or have questions about your own specific situation. As always, I'd love to help.
For more information about the J.P. Morgan slides listed above, see:
Page 65: Diversification and the Average Investor