How to Calm the Turbulent Mind in Uncertain Times

Uncertainty. We’ve heard that word a lot in recent years. However, in almost every uncertain period, resilience has surfaced

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Uncertainty. We’ve heard that word a lot in recent years. However, in practically every uncertain era, resilience has emerged. Our daily lives are characterized by perpetual change.

Some may argue that it is the only thing we can reliably forecast. In my more than three decades of experience in wealth management, I’ve seen market volatility come and go, which is to be expected.

The cycles are familiar — the economy grows and contracts, markets rise and fall, and our emotions are frequently swept up in the tides of change.

According to Schwab, market cycles differ in length. They shared:

A bull market is a prolonged period marked by positive sentiment and robust economic conditions. In contrast, a bear market is a long-term downtrend characterized by 20% drops from recent highs and widespread negative sentiment.

The historic bull run in US equities, which began in early 2009 and will expire in March 2020, is a recent example of a long-term market cycle.

Long-term cycles may also contain numerous shorter cycles. For example, within a long-term cycle, short-term sell-offs may not result in bear markets or periods of essentially sideways price movement.

As shown in the figure below, investors can recognize previous long-term market cycles using a monthly benchmark chart such as the S&P 500® index (SPX) during the last 20 years.

Throughout the years, from cycle to cycle, I have advised customers, friends, peers, and others to stay focused rather than emotional.

Learning to control your emotions can help you become a better investor by allowing you to make deliberate decisions rather than reactive ones.

Here are some tips to help you cope with the emotional upheaval of change.

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These strategies can help you make wise investment decisions while promoting health.

• Understand the need to evaluate your plan: Reevaluate your investment approach in light of your goals, risk tolerance, and time horizon. Review the procedures you have in place for responding to market changes depending on your specific scenario.
• Be on a need-to-know basis. Know Basis: Stay up to date on market news, but don’t let it control your thoughts. Aim for a balanced perspective by gathering information from credible sources rather than getting caught up in dramatic headlines. Headlines sell, yet they are typically full of hype to get views and clicks.
• Practice Mindfulness: Deep breathing, meditation, and yoga can all help you stay grounded and handle stress. Mindfulness can help you examine your emotions without allowing them to guide your actions.
• Diversification: Can help reduce risk while also offering new opportunities. It can provide a cushion against market volatility, potentially resulting in a more consistent overall return.
• Focus on Long-Term Goals: Remember your long-term objectives to avoid making rash judgments based on short-term market fluctuations. Reactive decisions rarely have positive effects.
• Respond with Intention, Not Impulse: A knee-jerk reaction generally fails to comprehend the big picture. Instead, evaluate the situation from all angles and determine whether any action is required depending on your approach.
• Communicate with Your Advisor: Consult with a trusted advisor to gain an impartial perspective on your investments and verify that your plan aligns with your objectives.
• Manage Expectations: Recognize that market volatility is expected and that investing has risks. Set realistic expectations for returns and be ready for ups and downs. This is an integral aspect of the procedure.
• Acknowledge and Address Your Stress: A healthy lifestyle promotes emotional resilience. Taking the time to exercise, get enough sleep, and eat nutritious foods will help you stay energized during times of stress. Recognizing that you are stressed is the first step toward adequately managing it.
• Reflect on Past Experiences: Consider how you’ve responded to previous market turbulence and whether those reactions were beneficial. Learn from prior experiences to better answer your questions in the future.

We may be unable to control what occurs in life, but we can always choose how we react.

The trick is to respond, not react. Reacting is an emotional reaction to a frequently impulsive situation that our prior experiences or concerns can influence.

Responding is a conscious and deliberate action that entails assessing the situation, examining choices, and making an intentional decision.

Integrating these methods allows you to manage your emotions better and make more sensible decisions during market turbulence.