Moods and the Market: How to Invest and Keep Investing

Are you a pessimist or an optimist? Is your cup half empty, or half full?

What about the financial markets? Is it a good time to invest?

I ask because I know some people (and I am sure you know some too) who always have a reason for why they are not invested or why they want to exit prematurely. Often by their own admission, they know they need to invest to reach their goals and yet they sit on the side-lines or get spooked into making costly mistakes.

Same Data, Different Experience

When the markets are doing well, they are worried about valuations and all-time highs. When the markets are undergoing corrections or in bear territory, they are always waiting for the other shoe to drop. This can go on and on, for years and years.

On the flipside, there are those who are happy to buy (or hold) while the markets are doing well and who remain calm while being equally happy to put up more capital when markets are being crushed because it is “trading at a discount”.

To me, the interesting thing is how two people can look at the same data, the same situation, the same news, and feel so differently.

What I Think Makes the Difference

How we experience market movements as investors is determined by several things including, our asset allocation, what instruments we use, our risk profile and goals, the buffers we have built into our wealth plan, and our mindset or beliefs about the future. At Providend, we like to say we need the right portfolio, the right mindset, and the right adviser.

Once we have taken care of the careful planning though, whether we can stay the course and follow it (barring significant changes to our circumstances) is really determined by how we manage our emotions.

Ways I Keep My Cup Half Full

There are several methods that we can use to keep ourselves invested and continually investing with less stress in any market. Here are four good options I use that may be helpful for you:

  1. Avoid sensationalist news and other noise.

Sometimes I browse investment news to keep abreast of the developments in the financial markets – it is after all, part of my job to remain current with what is happening. Not all news is equal though, and when I come across something with undertones of “the sky is falling” or “buy this for instant riches”, I am immediately sceptical. It is helpful to keep in mind that anything in the news that is too extreme is most likely exaggerated to garner more views, reads, or clicks.

Other types of noise can include social media posts, advertisements and rumours whispered by acquaintances.

  1. Revisit your plan to remind yourself that you are prepared.

Another way that I allay my fears about the market is to review what I have done at the planning stage. If I find that I have sufficient emergency savings to cover situations in which I may need cash fast, that I still have decently stable cashflow from my work situation (or I have a secure pot for my short-term expenses), and that the money I have invested is placed in a broadly diversified portfolio and in a suitable allocation for my goals, then I take a deep breath and relax. I tell myself that market fluctuations are part of the journey, and everything is working as it should. The ups and downs I am currently experiencing are a feature rather than a bug and have already been factored into my plan.

  1. Take a second look at the data and examine the evidence.

It is one thing to hear that the market tends to go up in the long run and that market timing simply does not work. It is another to look at the hard data from many decades prior and see that it is true. Past performance is not an indicator of future results, but it is the best we have to go on and the evidence tells a solid story.

When I start wondering if the market is overvalued, undervalued, or if I should be making the kind of call that only a psychic could make, I know it is time to do some revision.

  1. Surround yourself with support.

I have the benefit of being part of the Providend Advisory Team where I am constantly surrounded by people with decades of experience in investing and providing comprehensive, fee-only wealth advice. It certainly helps that whatever happens in the markets, I can easily find someone to remind me to deploy the above strategies.

Whether it is an investment club, a handful of friends or a fee-only wealth adviser, looking for support when you are in doubt can be helpful, especially if the people you choose share your philosophy and have made similar commitment to their investment goals. Everyone has doubts sometimes and having partners with you on the journey can make a world of difference.

Successful Investing Can Be Learnt

In the end, when it comes to the markets, being able to invest and keep invested in a diversified portfolio with a suitable allocation is the key to a good experience. Whether we are naturally optimists or pessimists may have some bearing on how easily we do that, but with some effort, the right habits, knowledge and company, I believe we can all do it – and do it well.

This is an original article written by Bryan Chan, Associate Adviser at Providend, Singapore’s First Fee-Only Wealth Advisory Firm.

For more related resources, check out:
1. 2 Illuminating Questions to Guide Your Investment Decision Making
2. The Relentless Pursuit of Better Investment Options
3.Why You Should Focus on Your Goals When You Invest

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