It is human nature for us to crave control when we face uncertainty. Think about those extra few inches you move your car forward when sitting in standstill traffic! You aren’t changing the equation, but you are doing something, which feels better to us than not moving and having those extra inches go to waste! Anything we can do to make us feel more in control gives us a sense of security when things around us seem out of control.
This is the challenge when it comes to investing. When the market gets turbulent, as it has been the last month, it increases our desire for control. Last week, Charlie gave you insight into what we are doing at Master’s to leverage this time as an opportunity; a different way of gaining some control over the situation. This week, I have a few tips on how an individual investor can do the same.
- Go Back to Your Why – Simon Sinek’s book, Start With Why, brought the power of this concept to the mainstream. Why do you have money invested the way you do? What is that money driving towards? What goal is it trying to accomplish? Generally, if we’ve planned appropriately, even a significant downturn like we are experiencing will not have a major effect on our ability to reach our goals.
- Re-Visit Your Timeframe – I find myself watching the stock market more closely day-to-day right now than I do normally. When chaos abounds, we tend to think with a shorter-term mindset. Re-visiting your long-term timeframes will help pull you out of this trap and will make the short- term market movements ‘less scary’. What happens in a day or a week loses its importance when we see it in the context of a few years or decades!
- The Market is a Pricing Mechanism – You’ve redefined your WHY and revisited your timeframe. So how should we evaluate the stock market in its current state? The stock market is simply a pricing mechanism. When you buy a stock, you are paying for the rights to the future profits and dividends of that company. Today, you can buy the rights to those earnings for 30% +/- off what they were a month ago! Since we’ve revisited your why and redefined your timeframe, we can see this as an opportunity to buy at a discounted price. (Charlie explained how we take advantage of this systematically in last week’s Minute.)
- Talk to Us! – Many times, just having a conversation about your concerns, questions or overall plan can calm your emotions and reframe your thoughts in a positive way. Especially in times like these, that is what we are here to do. In fact, we’ve had many conversations among ourselves along these lines in the last few weeks.
We can never have complete control during uncertain times, but we can have confidence in our financial plan. We encourage you to continue to seek hope and optimism amidst a difficult, fearful time. We are here to help you get there!
What recent conversations have you had that have helped you re-visit your principles and goals, and settled your worries?