Panic is Not a Strategy
Nothing like having your morning coffee and talking to your cat about time and threshold rebalancing strategies
Last weekend, I was perusing the Wall Street Journal and stumbled across section B4 and B5 titled, “What Happens Next?”. In it, the Journal interviewed five financial magnates about the market. As many of those interviewed often do, they made bold statements and predictions for the future. Knowing their collective predictive power is ZERO, many of us read along, believing these financial giants have a crystal ball. This, my friends, is a terrible mistake. It is a mistake for them to prognosticate, particularly now. It is equally miscalculated for us to believe they know where the markets are headed, whether it be up or down.
A meaningful statement from the CEO of Charles Schwab
From my point of view, one meaningful statement came from the CEO of Charles Schwab, Walt Bettinger, who posits that “panic is not an investment strategy". Mr. Bettinger, I so agree. Think about times in your life where panic is useful in a crisis. In reality, it rarely helps the situation get better and often makes matters worse. So, what is the opposite of panic? Words that come to mind are courage, calmness, peace, and composure. When it comes to your financial situation, model the opposite of panic and chaos. Be calm. Get off your screen and evaluate your portfolio in the quiet of the early morning. Yes, with a cup of coffee or tea in hand. Or, if you are a night owl (which I am certainly not), find some space once the kids are down to evaluate your plan and portfolio. Be at peace and take a deep breath. Be courageous, which may mean rebalancing your portfolio by selling quality bonds to buy quality stocks. Yep, buy low, sell high. Try being composed when thinking about money and ways in which a negative can be turned into a positive. Call your local credit union or bank to see if they can refinance your car or house loan, as recently rates are at record lows. Most importantly, collect yourself and find comfort knowing this too shall pass.
Over time, history has shown that global economies expand, and markets rebound.
However, nobody knows how long our current circumstances will last, nor do they see the direction the markets will head. Take the extra time you now have to develop a game plan for getting your family through this crisis. Getting through our current dilemma will require a measured approach to decision making. This includes the choices you make with your financial plan and money. In its aftermath, there will be plenty of opportunities to get back on track, as long as you keep yourself and your finances in one piece and do not panic.
Peter Fisher is the CEO of Human Investing, one of the largest and fastest-growing wealth management firms (Forbes) in the U.S. He is the author of Becoming a 401(k) Millionaire and blogger at 450 publishing. He received his B.A. in Economics from Linfield College, an M.B.A. from George Fox University, and is currently a 3rd-year Doctoral student researching financial literacy, and the concept of collaborative consumption.
