Right now, many of us have an emotional email waiting to be sent, a reactive trade ready to be placed, or an “I quit” proclamation that we’re prepared to make. We hope this reckless “reaction” will help us overcome the all-consuming stress and make the problem go away, but all too often this is exactly what throws us off track of what we’re actually trying to accomplish.
My goal with this reflection is to help us delete those email drafts, avoid placing those trades, and stay the course with a few sound principles that have helped me personally. Within the game of life and the financial markets, these phases of volatility are unpredictable, yet inevitable. In these times, we must remember that it is not the adversity that defines us, it’s how we respond to it.
Vanguard’s Chief Investment Officer, Greg Davis, recently wrote an article explaining three simple ways for investors to navigate these unsettling phases.
- Maintain perspective
- Don’t do anything rash
- Check your allocation (Maintain a healthy balance)
When I read the article, it made me think less about the markets and more about recent conversations that I’ve had with friends and family going through their own personal bear market. I’ve witnessed Greg Davis’ principles differentiate whether those people thrive, survive, or “nose-dive” under these challenging circumstances. Here’s what I mean:
Maintain perspective: When adversity strikes, try to zoom out from the immediate challenge and look at the big picture. While it’s difficult to pause and look up, I try to take a deep breath and ask myself, “Where do I stand today? What am I trying to accomplish? What adjustments do I need to make to reach my destination? What additional help do I need?” Adversity can cause us to lose perspective by zooming in and focusing all of our attention on the problem of the day. Zooming out has helped me in these times to find a clearer picture of tomorrow.
Don’t do anything rash: Nothing rhymes with Janiec quite like “panic.” I admit that I’ve been known to panic amidst a full court press in basketball. I recognize that I often make my worst moves under these challenging circumstances. Nevertheless, our responses in the heat of the moment may critically shape our future outcomes. Before I react, I take another deep breath and ask myself, “Why didn’t I choose to take this action while things were better and my mind was clearer? Will I be proud of this decision a year from now?” I sometimes find that the best action is temporarily not taking any action at all.
Maintain a healthy balance: Investors best handle these periods of volatility by rebalancing and sticking to their target allocation. This allows us to sustain exposure to what we need, while not unnecessarily risking what we already have. During periods of adversity, I take stock of what is most important. I try to rebalance during these times to ensure that my personal health, family, friendships and career remain stable despite the overweight of challenges that I might face in any particular area. Neglecting three domains to try and fix one only creates more problems.
So as you invest, or play the game of life, how do you navigate periods of volatility? Do you follow these principles? Try them out before you send that emotional email or place that next trade. Let me know how they work. I’m confident it will get better soon.
The Janiec Reflection 