Finance The world has changed. You can see it on the nightly news. You can read it in the headlines. You can view it, post it, tweet about it (or even TikTok about it, if that’s your thing) on social media. Most of all, you can understand it when you look at the movement of stock markets. This is a volatile world: a world in which politics, economics and other world events can have a significant impact on the value of your portfolio on a monthly, weekly, daily or even hourly basis. How long will this volatility continue? No one can know for sure. One thing which we can know, however, is that the seas will be choppy for some time. What with the confluence of shifts in global economic patterns, changes in politics, wild mood swings in the market and the “black swan” event that is COVID-19, the way forward for investors will not be clear and easy. But here’s the good news: there are several strategies which can help you deal with volatility, and ensure that it doesn’t have an outsized effect on your finances (or on your ability to sleep soundly). With that in mind, here are some simple ideas to make sure that your mind, your finances and your portfolio survive not only the current bout of volatility, but anything which we may experience in the future as well. Eleven (or so) survival strategies for a volatile world Practical hints and tips to help protect your finances, your portfolio and your mental health by James Dolan Mental tips Suggestions for how you can foster a strong, healthy mental mindset in the face of continued, persistent change. Have a process, and stick to it (mostly) No doubt you’ve heard it before: the most successful investors in the world are not necessarily the most intelligent, but the most disciplined. They have the ability to tune out distractions, ignore excessive negativity and pessimism and focus on fundamental business analysis, rather than on the short-term ups and downs of the stock market. And they can do it consistently, in all kinds of market environments. This is an essential character trait for any investor, at any time. But, during times of volatility, discipline becomes a paramount virtue of every successful investor. Because of the rapid pace of change − in the stock market, the global economy, the political arena and within the broader society at large − having a strong stomach and being able to stick to your investment process become critical for survival. How exactly can you cultivate mental discipline? One way is to develop a go-to investment process that you use most of the time, and mostly stick to it. Are you a buyand-hold investor, who doesn’t really like to follow the stock market on a day-to-day basis? Great. Are you a dollar-cost-averager, who keeps on investing no matter what’s going on in the market? Awesome. Are you an active trader, who likes to move in and out of stocks quickly? Sounds good. Are you one of those “deep dive” people, who likes to research a given investment upside down and backwards before you put your money on the table? Also good. Any or all of these processes can be successful ways to make money − if you can stick to them. When you deviate from your process, that’s when problems can arise: a long-term investor gets caught up in day trading, for example. Or a deep-value investor takes a flyer on a high-growth startup. That kind of thing creates a sort of mental disruption that leads to uncertainty, miscalculations and faulty decision-making. And no one needs that, especially during volatile times. 30 | www.snowbirds.org
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