Six ways to keep your cool when the markets don’t

When the Dow Jones Industrial Average (DJIA) dropped 800 points in one day last August, it was a reality check for investors who spent much of 2019 enjoying the Dow and other indexes flirting with all-time highs. But a timely reminder that markets can go down as well as up does little to ease the anxiety we can all feel when the markets are behaving erratically. If you sometimes fall prey to a little investing anxiety, these six “coping mechanisms” may help.

1. Ignore the noise

In a competitive media environment, the 24-hour news cycle delivers the news full of drama and hyperbole. It makes for good ratings, but don’t get drawn into it when it comes to your own mutual fund portfolio. Investment decisions are best made in a less emotional environment. Panic selling, for instance, simply locks in any losses and takes you out of the market should an upturn be around the corner. As an example, it took less than five trading sessions for the Dow to recover that 800-point single-day loss.

2. Steer clear of predictions

Of all the media voices during volatile markets, the least helpful are those predicting the future. It’s a skill few possess and not the basis for sound financial decisions. None of us has a crystal ball, so ignore someone in the media offering advice about the likely performance of tomorrow’s markets. Remember that mutual funds offer the benefit of professional management so you can leave it to the professionals to do the analysis for you.

3. Focus on goals, not investments

It’s easy to become obsessed about an investment: what about that holding, what about this fund? Instead, turn your focus onto your goals. Remind yourself why you are investing in the first place. For most of us, that’s a long-term proposition. If your goal is to retire successfully in 25 years, for instance, chances are the performance or activity of any one investment this week is not putting your goals at risk. Keep a long-term perspective.

4. Keep performance in perspective

The performance of an investment should always be viewed in its proper context. A high-flying growth fund that puts up big gains may have equally big downturns. A government bond fund will rarely offer eye-popping returns. A poor quarterly performance in one of your mutual funds may be a blip in an impressive five- or 10-year return. Don’t let just one number tell the whole story — keep your perspective.

5. Talk to your advisor

A research study has shown that Canadians who work with a financial advisor acquire a greater savings discipline, accumulate more assets, and the longer they get advice, the more their wealth grows.1 In times of market turmoil, we can provide the “hand-holding” to help you focus on your goals and keep perspective. And if action is required, we can help to take it carefully and prudently.

6. Consider a portfolio review

Not because you need a change but maybe to remind yourself that you don’t. In a portfolio review, we will revisit your goals and risk tolerance as well as determine where you stand in relation to your goals. In light of all this information, we can make any necessary adjustments. Knowing where you stand and that you are still on track can help relieve that investment anxiety. 

¹ Montmarquette, Claude. An econometric analysis of the value of advice in Canada. Montreal: CIRANO, 2012.

Mutual funds provided through FundEX Investments Inc. Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Please read the simplified prospectus before investing. Mutual Funds are not guaranteed and are not covered by the Canada Deposit Insurance Corporation or by any other government deposit insurer. There can be no assurances that the fund will be able to maintain its net asset value per security at a constant amount or that the full amount of your investment in the fund will be returned to you. Fund values change frequently and past performance may not be repeated. This information has been prepared by Peter Marchl who is a representative for FundEX Investments Inc., and does not necessarily reflect the opinion of FundEX Investments Inc. The information contained in this newsletter comes from sources we believe reliable, but we cannot guarantee its accuracy or reliability.

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