Why it is important to control your emotions during market volatility

Staying calm and patient can go a long way towards securing your financial future

If you are already investing, be mindful of your emotions and don’t panic sell. Photo: Getty

There are predictions of a recession looming as many people still try to recover from the financial effects of the Covid-19 pandemic.

And, unbelievable as it may seem, others are also still dealing with the aftermath of the 2008 global financial crisis, be it emotionally and/or financially.

Studies show that the emotionally negative effect of financial loss is far greater and lasts longer than the emotionally positive feelings generated by financial success.

Our brains are wired to remember bad experiences and suffering much more vividly and readily than positive experiences.

Many of my clients are reporting how they feel stressed and fearful about what’s going to happen. But, ever the optimist, I believe there is always a glimmer of hope or positivity if you look hard enough.

As individuals, we have little control over what happens to the global economy. But we do have control over our money choices, behaviours and mindsets.

As the old adage goes “charity begins at home”. Apply this to our finances and it rings true, as well.

We can play our part by using our money consciously and with intention. And not letting our fear-driven emotions run the show.

I acknowledge that fighting the rising cost of living is a daunting task but cutting costs and spending is one way to prevent debt in times of high inflation.

However, there is another layer we need to add to our financial toolbox - and that is investing.

If you are an investor, you are unlikely to get relief from the negative financial noise by looking at your portfolio right now. We are facing a bear market and share prices are falling.

But this is the glimmer of hope; a silver lining.

A bear market means stocks are on sale. All the best investors will tell you that now is the time to buy shares.

This is a significant opportunity for investors in the accumulation stage of their lives.

If you have extra cash sitting in a zero or low-interest bank account, it’s effectively losing its value. Now is the time to consider putting your cash to work so you not only retain its value and beat inflation, but also take advantage of the bear market.

If you are already investing, be mindful of your emotions. It can be a stomach-churning experience to see the value of your investments decrease, but it is vital that you don’t panic sell.

If you have done your homework and have a well-diversified portfolio, you will likely have planned for this.

Do your research and speak to experienced investors. It’s not the time to be speculative - in fact, there is never a good time to be speculative.

Make it as easy as possible for yourself and research low-cost exchange-traded funds (ETFs) and index funds with built-in diversification.

Remember billionaire investor Warrens Buffett’s advice: “Be greedy when others are fearful and fearful when others are greedy.”

Take advantage of current investment opportunities, but do your due diligence. Find someone experienced, level-headed and who isn’t receiving commissions to discuss your investment ideas.

Also think long term. Impatience is one of the biggest killers of your money and investments.

As Mr Buffett has said: “The stock market is a device for transferring money from the impatient to the patient.”

Investing is a marathon, not a sprint. Invest now and reap the rewards in more than 10 years. Your future self will thank you for your calmness and patience during these difficult times.

Carol Glynn is the founder of Conscious Finance Coaching