Improving Investor Behavior: We plan for this

Reflection: How have you been in the past month? Just four weeks ago, markets were on the verge of reaching all-time highs, and there was an air of cautious optimism.

A lot can change in a month. I am writing this piece a week before it goes live, and more changes are expected in those seven days.

You are probably already familiar with the recent investment news. I won’t go over the details or discuss the politics and policies influencing market movements. If you want to delve into that, you can turn to regular news sources. There is no shortage of alarming headlines and social media analysis.

Instead, I want to remind you: We are prepared for this.

I use the term “plan” instead of “planned” for a specific reason: No one could have predicted the recent events accurately. Saying “We planned for this” implies that we tried to foresee outcomes. That’s not our strategy. Instead, we “plan for this.” We anticipate the unpredictable, acknowledging that the future is uncertain. The only certainty is uncertainty.

The last four weeks have seen some of the most significant intraday trading swings in market history. There have been several days with over 5% swings on the S&P 500, which is highly unusual and unprecedented by historical standards. Comparisons have been made to events like the Great Depression, 1987, 2008, and the darkest days of COVID. As one trader described it, we’ve witnessed 10 years of market movements in just a few weeks.

In my columns, I often stress the importance of having a long-term financial plan. When things are going well, and markets are rising, it’s easy to overlook the value of that plan. But during volatile times like the past few weeks, the significance of the plan becomes much clearer.

Remember that your plan was designed by considering the market over a long period — encompassing all events, both positive and negative. From trade wars to technological advancements, all these factors create peaks and valleys on a long-term chart. A lifetime is a lengthy period, and your plan is prepared for whatever comes next. The question is, are you?

Our constantly connected society tends to focus on the present, losing sight of perspective. When your phone buzzes constantly with the latest news, often in alarming caps, that perspective disappears. The urge is to do something — anything — RIGHT NOW.

Stop. Take a breath. Put down your phone. Tune out the news. This is what we have planned for.

The most challenging aspect of any financial plan is an investor’s willingness to stick to it during turbulent times. An anxious investor can derail even the best plan, which is why I emphasize the importance of good investment behavior. Without it, the markets can become a destroyer of wealth. With instant trading at your fingertips, the potential for disaster is more accessible than ever.

Reflect on the past few weeks. How much news have you consumed? How often have you checked your investment portfolio? How did it all make you feel? Were you terrified? Overjoyed? Somewhere in between? Did you make any decisions you now regret? What influenced those decisions?

I am not here to shame you if you made mistakes. We all make them. However, times like these prompt us to conduct a personal debrief. While everything is fresh, jot down what happened — with honesty and humility. Note the thought process behind your decisions, whether impulsive or deliberate.