What I Tell Myself When Markets Misbehave

Bryan Chan

Investing has been a particularly scary activity this year. Compared to the positive double-digit returns of stocks in the last two years, the performance of the general stock market, and even the bond market, has been dismal.

For those who are already invested, the series of negative events this year has battered our portfolios. And even those who are long-term investors may be losing faith.

The other people on the sidelines dare not enter the market either despite the deeply discounted prices we see today.

This is normal.

Investing is always scary, there is no doubt about that.

I am optimistic when it comes to life (and markets). I believe that the market will recover. I believe that with the right portfolio I will capture the recovery effectively, benefit from better days and come out ahead in the long run. And that someday, not too far off, everything will be okay.

Not everyone has that conviction, and I can understand why.

Why investing is scary

It is hard to do nothing (even if we are in the right portfolio) when our precious money—crystallised blood, sweat and tears—is on the line. It is impossible not to worry about losing it all and starting again.

It is difficult to shake the nagging feeling that creeps up on us when wealth advisers tell us that with the right time horizon, and the right portfolio capturing returns from the broad market, our chances are as good as they can be.

What if something fundamental has changed in markets?

What if we are the unlucky ones that experience a black swan event?

Or what if we experience a specific period over which markets do not recover, or do not give us the returns that we need for our goals?

After all, we only live one life and experience only one set of all the probable outcomes.

Why I invest anyway

To be honest, I do not have perfect answers to these questions. No one does.

And what I am trying to say is not that we should be eternally optimistic, or that we should ignore these negative possibilities, but perhaps that we have little choice but to accept them in some form or fashion.

The great John Maynard Keynes once wrote, “The Future is not unknown, it is unknowable.”

And to me, this could not ring truer, especially when faced with the uncertainty that is present today.

The nature of the future is not just that we do not know what will happen, but that there is simply no way of knowing what will occur.

What this points to, to me at least, is that we can only control what we can (e.g., investing based on evidence and sound principles, and having a solid wealth plan that we can adjust along the way) and leave the rest to God (or the universe).

It means that we should not keep all our money in cash if we need returns for our goals and mind our money being swallowed up by inflation—because our best bet is to invest and stay invested.

It means that we should not turn to clever fund managers who promise a way to outmanoeuvre an unknowable future and give us supernormal returns or help us to avoid the volatility that may yet come—because even they do not know what the future holds.

Keep calm and carry on

Can we realistically do it? Of course, we can.

If you think about it, we do it all the time when we get behind the wheel of a car or board an airplane or cross the road.

We wear a seat belt, look both ways and pay attention to the safety briefings—then we hope for the best and keep moving forward.

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

For more related resources, check out:
1. Holding Cash Might Not Be as Safe as You Think
2. Evidence-based Investing – Why Is It Important?
3. Lump Sum Investing vs DCA, Is There a Clear Winner?

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