Staying Cool In A Panic

Experts will tell you that you shouldn’t let your emotions drive your investment decisions. Fair advice, but emotions are difficult to understand. Especially during times like this when we are all dealing with a “new normal” in the wake of COVID-19, including unpredictable markets.

If you feel panicked by the markets, remember you are not in physical danger. What you are feeling is emotional.

Emotional decisions are based on instinctive or intuitive feelings and distinguished from decisions based on reasoning or knowledge. It would be useful, I suspect, to know which category we fall into during these turbulent market times.

Know your money decision drivers

It’s well known that behavioral styles drive money (by influencing every personal and financial decision) and the flow of money reflects behavioral styles. But if you don’t know your own money decision drivers, this could be why you are experiencing emotional anxiety.

The best investment you can make right now is not in the market, but into knowing yourself before you wreck yourself. Behavioral insight is the key to acknowledging and working with your emotions.

I recognize it may be easier said than done. But here are some suggestions to calm your emotions during this time:

• Emotions are important; they are part of our inherent behavior – but where money is concerned, don’t act on them.
• Know that emotions can be revealed and, therefore, understood and managed.
• Get to know your financial personality (hopefully your financial advisor has already used a scientifically validated process to establish this for you).
• Identify your naturally instinctive behaviors, money attitudes, automatic biases and habits which strongly influence your decision-making, particularly under pressure.
• Stop and think about the consequences of previous emotional decisions you’ve made. (Some may have worked out, but I know most emotional decisions do not end well.)
• Calm down – you’re okay; you can make rational decisions even in volatile markets.

Making good decisions – with good counsel

As human beings we all have certain decision-making biases that are hard-wired into us. These hard-wired behavioral and emotional biases can be predicted, as they are inherently part of our DNA, which is scientifically measurable. The biases will usually reveal themselves in times of higher market volatility – when a person is under more pressure or when a major life event takes place.

Work with a financial advisor who places your needs and life plans at the center of a goals-based financial planning process. If they are not advising based on practical financial personality insights and asking you powerful questions about how and why you make decisions – maybe it’s time to seek advice elsewhere.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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