It is amazing how predictably irrational we humans can be! Our brains are subconsciously seeking certainty, especially as things become more uncertain – and that applies to market fears as well.
With a 2023 recession on many people’s minds, you’re probably wracking your brain for ways to cut costs, save money and make the most of your investments. But before you jump into making any major changes, you need to be sure you’re thinking clearly and rationally. Luckily, your financially-savvy friends here at Clarity can help!
3 Tips for Calming Market Fears
Staying calm is often easier said than done – so we’ve rounded up our top tips to help you survive turbulent markets.
1. Avoid Impulsive Decisions
The only changes to make to your investment portfolio should be in connection with your plan. Jumping to rebalance portfolios now may damage your long-term plan.
While your investments may show losses, those losses remain unrealized until you actually sell your stocks. If you are able to ride out the turbulence, history shows that often they will recover.
2. Tune Out the Noise
Beware of the people that predict the future, especially those profiting from clicks, shares, or advertising.
Market forecasts are not much more than entertainment and heeding such advice can do more harm than good. Today is no exception to that truth. We may be tempted to abandon our plan and let allow “expert” forecasts to guide our decisions. Let’s consider a real-life example:
In early 2020, Goldman Sachs came out with a negative outlook, expecting the market to drop even more. This type of announcement, especially after high volatility and market losses, can influence investors to run to the sideline for safety (aka raise cash, lighten up on stocks). But we just don’t know what will happen. At times like these, putting things in perspective is essential.
Do you know what Goldman said just two months prior? They were “moderately pro-risk…with an overweight in equities and an underweight in bonds.” They also said, “sharp increases in oil prices might weigh on risk appetite.” Yes, this is completely laughable. You will say, “Hey, that’s not fair, no one can predict that stuff.” To which my response is, “EXACTLY!”
The issue is not that investment banks can’t predict this stuff. The issue is that they pretend they can. And what’s worse is the non-experts repeating phrases to get the maximum attention.
3. Consult with Your Financial Professional
Your financial planner is familiar with your unique situation as well as experienced with market fluctuations, so they’re a great resource for keeping things in perspective and reducing risk.
As always, we are here to discuss any concerns or questions our clients have. We hope that this helps you sift through all the noise and maintain perspective. If you have friends that you believe could benefit from such sanity, we invite you to pass this along to them.
Learn More with Clarity
Our advisors can help you prepare for the future with confidence. Click here to schedule a consultation with Clarity Wealth today.