Clements: Don't Lose It. (On Controlling Emotions in Market Turmoil)
Posted: Fri Feb 28, 2020 3:59 pm
Jonathan Clements offers a timely inventory of classic behavioral mistakes to help provide needed context for the recent market volatility — and a guide for how to avoid those mistakes.
Don’t Lose It
Don’t Lose It
HERE’S THE LEAST surprising thing you’ll read this week: You can’t control the financial markets.
But don’t despair: There’s also much that we can control, including how much we save and spend, the amount of investment risk we take, how much we pay in investment costs, our portfolio’s tax efficiency and—most critically at a time like this—our own emotional reaction to market ups and downs.
The last of seven counterproductive behavioral responses Clements identifies:Feeling unnerved? It would be shocking if you weren’t. Think about all the ways that this year’s market action has messed with our heads.
Illusion of control. Faced with danger, often our instinct is to act. That can make us feel more in control of our destiny—but it may not be good for our financial future. Most of us hold a portfolio built to help us pay for retirement and other goals in the decades ahead. Should we mess with that investment mix simply because of a few rough days in the market? To ask the question is to answer it.