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Limit your reactions to volatile markets


My wife Meagan and I feel parenting has made us better people as it allows us to truly reflect on what our values are as we teach them to our four-year-old (soon to be five) daughter Avery. Last week Avery came home from school, complaining about the actions of one of her classmates. We listened, with empathy, while she told usher story. Our response to her was, “worry about yourself. You can’t control how others act, but you can control your response”.

This valuable life lesson can also be applied to many areas as it has so many parallels. Too many things are completely out of our control and yet, we find ourselves fretting about them and monopolizing our finite mental energy. One of the keys to personal, and investor, success involves focusing on elements we can control: spending and saving, prudent personal goals and healthy relationships with money.

Too much emphasis is put on things we cannot influence, such as what other people do, investment market results or interest rates. Not enough energy is put into reflecting on, and controlling, our own behavior. Successful investors continue to act on their financial plan, their “roadmap”, whilst investors who fail often do so by reacting to the markets and external events, things completely out of their control.

There are things we can all control to help us be better people and successful investors. The first is we should aim to be optimists and have faith in the future. It is difficult for anyone fundamentally fearful of the future to be a successful investor; they will sleep better at night stocking up on canned goods and ammunition while they await Armageddon! There is always a reason to be fearful of tomorrow and the ‘doomsday’ which is sure to be coming. However, with investing, optimism is the only realism. The future is bright.

We must also have patience and the ability to continue to do the right thing. We live in an age of late breaking news, unending online financial discussions, talking heads with opinions; all of which tell us we must do something now! (and hit ‘subscribe’ below for our newsletter). We have access to everything but perspective. These are huge distractions to long-term investors on the pursuit of a better life.

We teach Avery to ignore those who don’t make her smile, don’t fill her ‘happiness bucket’ and aren’t a positive influence in her life. We tell her, “let them be. They’ll go away”. Having discipline, or the capacity not to react, is difficult but critical to being happy and staying on track for the future. We mustn’t do the wrong thing at the worst possible time, namely reacting to a bully, letting our emotions takeover or panicking out of our quality, long-term investments at a moment of extreme pessimism. Don’t just do something; stand there! I jokingly encourage families to freeze their investment account passwords in a block of ice in the freezer to avoid making impulsive, emotional decisions. We teach Avery to take deep breathes to calm down.

These first three traits of managing ourselves, including personally and whilst investing, including having faith in the future, being patient and staying disciplined, are largely qualities one must exhibit on their own, internally and individually. They can be identified, and improved, with self-reflection.

Now is a great time for each kindergartener, and investor, to take inventory of their own feelings and beliefs in life and investing, before the next bully tries to get under your skin or the next bout of market volatility arises, which is inevitable.

Together, we can work to keep you on-track towards your financial goals. Request a consultation with us to learn more.
 

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