Interactive Investor

How this investor is fighting fear amid market turbulence

12th May 2022 09:04

Dinah Wolf from interactive investor

With talk of recession and a cost-of-living crisis, every investor is having their nerves tested right now. Our Gen Z columnist explains her behavioural reactions and what she’s doing about it.

To say that the current economic and social situation is all feeling rather overwhelming is a massive understatement. It honestly feels like I’m being blindfolded while asked to hit a bull’s eye - 99.99% impossible. Unless of course, my mask is see-through. But that would totally be cheating!

As a newbie investor, this sort of less-than-ideal environment can literally throw me off my dingy boat. But I will stubbornly hold on. And you should, too. See, when markets sell-off badly (like they’re doing now) more often than not, it’s usually the case that our perception towards markets has changed more than the fundamentals themselves.

Investors got totally spooked (a war has that affect), which meant that they dumped stocks regardless of whether they warranted a ‘sell’ or not. But therein lies the opportunity. We tend to overestimate the bad news and underestimate the good news.

You may be wondering what on earth you should (or shouldn’t) be doing to your investment portfolio amid all the craziness. Should you be buying gold and call it a day? Or snap up every income-generating stock you can get your hands on? I think otherwise. Fear will get you absolutely nowhere. It might preserve your money, sure, but it certainly won’t let it grow.

The issue is that fear sells. And the media is full of it. But fear is like a paralysis-inducing drug. It won’t allow you to do anything, at all. All you can see are the dark clouds that simply won’t budge. You see all the many ways in which things go wrong. And, right now, there’s a lot that’s hanging in the balance. Russia’s invasion of Ukraine, stagflation, whopper debt levels, rising interest rates. I could go on forever.

And just when you feel like selling, that’s probably when you shouldn’t. Because we usually end up selling when markets have already priced in all the bad news so, if you do sell, well, you’ll be selling on the down. And voila, you’d have converted your paper losses into real ones.

Remember that markets almost always recover. It’s a question of when, not if. So have the courage to stick around. Something that helps me get over the sheer fear when markets collapse is telling myself that the wins that’ll come about from being invested will taste so much sweeter than those pesky losses ever will.

Do your best not to fixate on those losses. Get comfortable with being able to lose money. If you can do this, then you’ll be building yourself a shield for when markets turn real sour. Because if you can cope with losing your hard-earned money, then you can pretty much handle anything!

You can’t win if you don’t lose at some point. Everyone loses money. Even the very best investors. But don’t let that distract you. Stay in your lane, invest regularly and pop on the best noise-cancelling headphones to mute any dangerous fear-mongering noise; the noise that usually causes us to freak out and click ‘sell’. At the worst possible time.

Trust in the process and remember that good things come to those who wait (and hang on).

These articles are provided for information purposes only.  Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties.  The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.

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