Gut check: How have you been over the past month? When my last column was published a scant four weeks ago, markets were knocking on the door of all-time highs, and the overall feeling was one of cautious optimism.
A lot can change in four weeks. I’m writing this article a week before its publication. Even more will likely shift in those seven days.
You’re likely already aware of the most recent investment news. I won’t reiterate the actions and reactions or argue for or against the politics and policies influencing market movements. If you want to entertain that anxiety, turn to standard news coverage. You’ll likely see no shortage of big red banners, bold text, and he-said she-said social media analysis.
Instead, I’ll offer a simple reminder: We plan for this.
I say plan, not planned, for a specific reason: No one could have accurately predicted the recent events. “We planned for this” subtly insinuates that we took a stance, attempting to predict outcomes. That’s not a game we play. Instead, “we plan for this.” We plan around the unpredictable, acknowledging simply that no one knows the future. The only certainty is uncertainty.
The past four weeks have held some of the highest intraday trading swings in market history. We’ve seen a handful of days with greater than 5% swings on the S&P 500, which is not only highly unusual but simply unheard of by historical standards. Comparisons point to the Great Depression, 1987, 2008, and the darkest days of COVID. As one trader put it, we’ve seen 10 years of market movements in the span of a few weeks.
In this column, I often encourage readers and clients alike to have a long-term financial plan. When things are green and markets are going up, it’s easy to forget the value of that plan. But during volatility like that of recent weeks, its value suddenly becomes much clearer.
Remember that your plan was ideally built by assessing the market over a very long time — a period that encompasses any and all events, both good and bad. Tariffs and wars to groundbreaking innovation and victories all create hills and valleys on a long-term chart. A lifetime is a long time, and your plan is ready for whatever comes next. The question is, are you?
Our perpetually connected society is ever focused on the here and now, which results in a loss of perspective. When your phone buzzes all day with the latest news, often with an increasing number of capital letters, that perspective vanishes. Instead, you must do something, anything — RIGHT NOW.
Stop. Take a breath. Put down the phone. Turn off the news. This is what we plan for.
The hardest part of any financial plan is an investor’s willingness to stick to it when things get rocky. A nervous investor can derail the best plan, which is why I so passionately espouse the values of good investment behavior. Without it, the markets can become a wealth destruction machine. And with the proliferation of instant trading at your fingertips, the potential for disaster has never been more readily available.
Think back over the last few weeks. How much news have you consumed? How many times have you checked your investment portfolio? How did you feel about it all? Terrified? Overjoyed? Somewhere in between? Did you make any moves you now regret? What drove them?
I’m not interested in shaming you if you made a mistake. We all do. But times like these invite us to do a personal debrief. While everything is fresh, write down what happened — with honesty and humility. Document any thinking that led to your decisions, whether rash or prudent.
Remember that we are financial advisers, not financial dictators. If you insist you want out even after we’ve attempted to talk you off the ledge, we’ll follow your order (then suggest you find a new adviser). At the end of the day, you are responsible for your decisions. Did your thinking lead you to good choices? If not, what will you do differently going forward?
Undoubtedly, millions were made and lost over the past few weeks. Our nation’s largest banks called for an upcoming recession only to — and I’m not joking — rescind that call within eight hours. No one knows what will happen next. People can guess. They can bet. They might even get it right. But a good financial plan is built for the unknown. It recognizes that a single win isn’t nearly as meaningful as being mostly right, most of the time. It looks to history, not headlines or social media, for guidance. All it asks for in return is your patience to see it through.
The last month has brought many lessons on investing — some specific, some general. As investors, the best thing we can do is sit back and truthfully analyze our thinking. It’s normal to feel nervous, anxious, fearful and more. Emotions are human. But don’t let them affect your decision-making. Don’t let them override the work you’ve done in partnership with your advisor. No one knows what will transpire ahead. Volatility may subside, or it may increase even further. How you respond will define your character as an investor.
Steve Booren is the founder of Prosperion Financial Advisors in Greenwood Village. He is the author of “Blind Spots: The Mental Mistakes Investors Make” and “Intelligent Investing: Your Guide to a Growing Retirement Income” He was named by Forbes as a 2024 Best-in-State Wealth Advisor, and a Barron’s 2024 Top Advisor by State.
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