Coronavirus: Why Your Next Moves Are More Important Than the Markets- 09.20
With the number of infected patients rising every day, it’s nearly impossible to avoid feeling stressed or anxious about the world’s most recent pandemic. Aside from the concerns for our health, the financial toll of the Coronavirus pandemic is evident across the globe. After 11 years of a bull market, the stock market entered a bear market on March 11, 2020, with the market fluctuating in an unstable state since. But as an investor, it’s important to remember what your biggest focus should be right now: your personal economy.
This is an emotional time for everyone, there’s no doubt about it. But one of the greatest dangers to your wealth may not be the market’s dips and dives, it may be the temptation to make emotionally charged decisions regarding your wealth. Below we’re discussing the impact behavioural finance can have on your investments and what you can do about it.
What Is Behavioural Finance?
In a perfect world, the stock market would be predictable. Philosophers and economists have studied the markets for decades, even developing theories and models to explain and predict trends and responses in the market. The problem? Money, and the way we interact with it, isn’t black and white. As humans, we typically cannot make objective decisions regarding our own money. Whether we realize it or not, we are influenced by subconscious biases and, especially in the face of a pandemic, what we read and hear on the news. This behavioural bias can help account for unexplainable phenomenons in the market.
How Behavioural Finance Impacts Your Portfolio
Even the most disciplined investor could be having a tough time staying strong in the current economic climate. With new information about market changes and the spread of COVID-19 flooding social feeds and taking up entire news cycles, no one is immune to hearing about it.
When you hear on the news that the market has plummeted, your first instinct may be to get out immediately. This is a gut reaction, fueled by the short-term fear of a market crash. However, now’s the time to remember the truth about your investments: they’re meant to be a part of your long-term financial goals, not short-term gains.
When in Doubt, Call Your Advisor
To help avoid making impulsive, emotionally charged decisions about your money, talk to your trusted financial partner. Find reassurance in their calm demeanor and big-picture mentality. The market is meant to cycle, and using strategic, logistical planning is one way you can stay focused through these uncertain times.
It’s important to remember that your advisor is meant to act as the buffer between your emotions and your investments. With shifts in the market, now may be a good time to reallocate certain assets. This decision, however, should be based on facts, logic and experience, something your advisor can help you with.
2020 has certainly been off to a rocky start. But as you work to keep your loved ones safe from the spread of COVID-19, remember to keep calm, stay rational and remain informed about your investments as well. We are here to help you stick to your long-term goals, so you should always feel free to reach out with your concerns and questions.
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This publication contains opinions of the writer and may not reflect opinions of the Advisor and Manulife Wealth Inc. and/or Manulife Wealth Insurance Services Inc. (collectively, “Manulife Wealth"). The information contained herein was obtained from sources believed to be reliable. No representation, or warranty, express or implied, is made by the writer, Manulife Wealth or any other person as to its accuracy, completeness or correctness. This publication is not an offer to sell or a solicitation of an offer to buy any of the securities. The securities discussed in this publication may not be eligible for sale in some jurisdictions. If you are not a Canadian resident, this report should not have been delivered to you. This publication is not meant to provide legal, financial, tax or investment advice. As each situation is different, you should consult your own professional advisors for advice based on your specific circumstances.