March is the month in New England that brings a shift of weather. The winds are strong, the sun is higher, the snow is melting and the sap is running for maple syrup. Along with the winds of change, there is the hope of spring amidst the muddy roads. We New Englanders are used to the changing seasons. They arrive four times a year and despite the daily variety, they fall in semi regularity.
As investors, we are not used to the volatility of the stock market. I may smile and notice today started out 30 degrees warmer than yesterday or 30 degrees colder, acknowledging that is all part of New England weather. However, when investors see the market down a thousand points and up a few hundred, only to go down again, there is a sense of lack of control. The uncomfortable feeling of not knowing what to do. What we are used to is a change in the market. The change where it goes up. No one wants to see it go down. But the fact is the stock market by nature is volatile. We do not have any control over the stock market then we do the weather.
Living with market volatility is not for everyone. That is why adopting an investment strategy and sticking to it whatever the market session is doing is the way of the long term. An investment strategy means you have enough cash to weather a year of your life, you have a source of stable investments and are in the stock market that suits your personality and age.
Here are the questions I have been asked over the past week:
What should I do?
What do you think of the market?
What is going to happen next?
There is no one right answer. You need to develop a strategy that works for you.
We never know in New England when a big storm is going to hit, though meteorology is getting better at predicting it. However, we can have a plan for a stash of food, fire wood for the stove and even a backup generator if we wanted. This is being prepared.
Be Prepared in the stock market means you have a strategy to sustain you no matter what happens during its unpredictability.
So if the volatility of the past few weeks is sending you into panic and a round of questioning, stress may be making you feel the need to do something in a venue you cannot control. Perhaps if you are overwhelmed with its loss, you need to ponder if the stock market is for you. Maybe it is not and the reliability of cash and consistency of bonds’ returns will better suit your personality and time of life. And if you do not want to give up on the market but are feeling unsteady, maybe a switch to less of your money in the stock market would better suit you. Then, whatever the year and decade ahead holds, you would weather with lower stress levels. After all, New Englanders are known to fly south for most of the winter and some for most of the year. The conditions are less harsh and more predictable. No one judges them for wanting a simpler life. You too can make a simpler life while staying put.
Instead of watching the news, opening your statements and wondering what is going to happen next in the economy or investment world. Think about what suits you. Are you are risk taker? Do you handle financial stress well? Then, take one small action that will fit you and your money best. Drastic measures never saved anyone.