Stuart Gillin, CFP, Investment Advisor, Baker Boyer
There’s two buttons I never like to hit, all right? And that’s “panic” and “snooze” – Ted Lasso
The most frequent question I am getting from my clients lately is “what do we do now?”
This question is the result of months of volatility plunging some U.S. stock indices into bear market territory. Pair these markets with foreboding economic headlines and you have all the ingredients for anxiety. The unease we feel around markets leaves us feeling that we “must do something.” The feeling that we need to act is called the “illusion of control” in academic literature and it will run wild if we let it.
When answering clients’ questions about what changes need to be made, it can be helpful to first frame the decision as what we should not do.
A relevant cultural example in this vein comes from the TV character Ted Lasso, when he says “there’s two buttons I never like to hit, all right? And that’s ‘panic’ and ‘snooze’.”
For many of us, our first instinct when we see our account decline is to panic.
It feels safer to sell stocks and we are drawn to the immediate relief of no longer having to worry about the market. However, we know that the decision to get out of the market can have disastrous consequences in the long run.
Here are a couple of pieces of advice I like to offer in lieu of hitting either the “panic” and “snooze” button:
Four Tips for Avoiding the Panic Button:
- Getting back into the market is hard
Years of data have shown us that those who cash out have a hard time getting back into the market, and when they do, it is often at a higher price.
- Stay the course, and stay in your seat
The ability to stay in one’s seat through market turmoil is often what separates a successful investor from the rest. Two thoughts come to mind: The investor who sold their stock in March of 2020, who likely missed out on some of the strongest months in market history over the following year; and Warren Buffett, one of the most successful investors in history, is known for saying “Our favorite holding period is forever.” This quote gives us all something to think about before we sell during a down market.
- Have a plan
Craft a financial plan to come back to during these hard times. Plans keep us on course and remind us of our long-term goals and our strategies to achieve them; a financial plan is the most impactful way to help us avoid panicking during market swings.
- Listen to your advisor
While apps and a plethora of online education tools can streamline your investment activities and contribute to your education, they can be a piecemeal approach to achieving a truly strategic investment plan. Financial advisors can recommend impactful changes that center around your financial plan and a consistent investment philosophy.
Don’t Hit that “Snooze” Button
When the market reprices, it creates opportunities to make changes and seek higher returns. During a market shift, it may make sense to look at rebalancing a portfolio, harvesting some losses – or even investing some extra cash.
Remember that as volatility continues, having a strategic plan, long-range goals, and an understanding of historic market performance can be key to your success. That, and avoiding both the “panic” and “snooze” buttons.
About the Author
Stuart Gillin, CFP™ is an investment advisor with Baker Boyer, focusing on a holistic approach to financial planning and investment management.
