October 19th, 2020

Ignore the Turbulence: the Importance of Refusing to React

This cartoon demonstrates that some investors react with emotion when they are investing. When reacting with emotion, they tend to buy and sell at the wrong time, which can result in lower rates of return. However when a professional investor just buys, and holds the course, (rather than trying to time the market), higher rates of return can be earned.

For example if the market drops by 20 or 30 percent (and the headlines are "doom and gloom") this can be painful – and, being afraid of losing more money, an investor may react (panic) and sell their investments. Then, when the stock market recovers (and the news is goes back to being "good") these investors may feel less scared – so they invest again – but now, they may be buying at a high point.

With a well-prepared Financial Plan, Spire Advisors help our clients stay on course, ensuring that the journey is smoother by avoiding deviation from the flight plan that was agreed upon in advance.

Yes, turbulence may bounce us around at times; but refusing to react with emotion – and trusting in the pilot (our well-prepared Financial Plan) to guide us safely – is an integral part of what we do.

Written by: Ian Jenner & Jamie Geisler, CFP® / Senior Financial Advisors / Spire Advisors of Assante Capital Management Ltd.

Illustration by: Hedgeye Cartoonist Vishal Khandelwal