With the COVID-19 pandemic spreading across the globe, remaining healthy is naturally top of mind. While we are all prioritising the health and wellbeing of ourselves and our families, it is important to also pay some attention to our financial health.
While life as we know it has been turned on its head, remaining rational when it comes to your investments is a key currency that will protect you from making costly mistakes. It is important to try to stick to your financial goals, despite the current volatile climate. This may help you avoid making rash investment decisions, which could have detrimental long-term implications on your investment outcomes.
The current market volatility may be unsettling and uncomfortable, but there are ways you can stay on track and not let the market noise and uncertainty affect your financial goals:
- Recognise your emotions. Many of us make the same mistakes with our money over and over again: We tend to buy high out of greed and sell low out of fear and repeat this process. Taking stock of how you are feeling, and creating space to think things through, can help you not to act on these emotions.
- Avoid over-checking your investments. Technology has allowed us to stay connected with the world around us: to read the latest news headlines, to work from home, to communicate with our friends and family. However, it is the same technology, that provides us easy access to our investments. Checking on your investments too often can create unnecessary stress and anxiety.
- Avoid panic selling. The term ‘panic buying’ seems to have been embodied by the global COVID-19 pandemic, as we were all confronted with long queues at the stores, frustration at not being able to buy what we needed, from toilet paper to protective masks. While the fear of losing your hard-earned cash may make you want to withdraw your investments, remaining disciplined and committed to your investment goals can save you from making costly mistakes.
- Review your financial goals. Our investment choices depend on our goals and circumstances and during this time, there may be unexpected events that affect your finances. It might make sense to review your financial goals, to ensure that your investments are still aligned to your goals. Remember that if your financial circumstances have changed, you may be able to pause your monthly contributions to your investments without penalty – it’s worthwhile talking to your investment manager.
- Speak to a professional: One of the roles of an independent financial adviser is to assist you in creating financial discipline and to help you recognise how your emotions can prevent you from achieving your long-term goals. A good, independent financial adviser can also help you navigate the uncertainty of this current climate and prepare a plan that addresses both your immediate challenges and your long-term goals.
If your circumstances have not changed and you have chosen the right investment partner, with a long-term track record of performing through the cycles, and you have a well-diversified portfolio, a changing environment shouldn’t make you panic. Stay focused and avoid responding to the noise. This will help you succeed in your long-term objectives. In the words of Benjamin Graham “Abnormally good or abnormally bad conditions do not last forever? This too shall pass.”
About the author(s)
Lettie Mzwinila, Allan Gray