Investor Behavior During Uncertain Times

February 03, 2023

Let’s face it, the world is weird right now.  The markets have been a roller coaster ride, the debt ceiling is a looming problem, Congress and the White House are arguing with each other like 6 year olds in a playground spat, inflation is high and the Federal Reserve is raising rates (yet again). Investors are scared.  Many are worried that their life savings are going to zero!  Today we’re going  to talk about why it’s important to talk with your Financial Planner about anxiety.

Your investment time horizon is important to regularly discuss with your Planning partner.  Have your goals changed? Is there a new addition to your family? Is there a job or career change imminent? Perhaps a large purchase (a new home or car) coming up that you are looking at?  The timing of withdrawals in turbulent markets can have an impact on your investment performance. There are several studies that show that moving to cash in a down market prevents investors from fully experiencing market recoveries. Generally speaking, keeping your eye on the ball is helpful during times of high volatility.  If your plans for your investments are longer term, staying invested is the most reliable way of making back what you may have lost during market downturns. 

If you’re already regularly withdrawing funds to maintain your lifestyle, your Planner should know that.  Talking with your Planner about reallocation is key.  We may have a recession coming, and let’s be clear, we’ve had them before and will again, the timing of getting kids through college, retiring or that dream vacation should be part of the discussion (especially in turbulent times).

The world is not coming to an end.  It’s extremely unlikely that the US will default on its debt. Stocks historically like interest rate hikes.  Interest rates have been unreasonably low, and recessions have historically come every decade or so.  That’s the reality of it. As Warren Buffett says be “fearful when others are greedy, and greedy when others are fearful.”  Work with your Planner to be on course in a way that works for you.