FIRST HOPE, NOW PEACE

Not long ago I wrote that according to statistics from the Department of Labor, over half of all financial advisors had never experienced a bear market first-hand. I can safely set that statistic aside now. This crisis has been quite an education for investors and their advisors. Based on some younger financial advisors who have reached out to me recently, they are finding that a bear market looks a lot worse in real life than it did in a college textbook.
 
In training, pilots are given a series of emergencies and taught to follow a checklist in order to obtain a positive outcome. Training can simulate the physical conditions of a crisis, but unfortunately it can never simulate the accompanying fear. In a real emergency, emotions can overwhelm a pilot and cause him to forget to follow his checklist.
 
This was impressed upon me by my initial flight instructor who unexpectedly turned off the plane’s power in flight. Initially I panicked, not knowing what to do. The instructor held his hand out to indicate calm as he said, “Take your time. From this altitude you can glide for 25 minutes before reaching the ground.” Knowing that I had time, I calmed down and carefully reviewed the engine-out check list which guided me to a safe outcome.
 
During the stock market crash of ’08, there were many who panicked and gave up on investing entirely. I also knew several financial advisors who left the industry. One told me he couldn’t take the stress of it, so he opened a small retail business. Ironically, his business is now closed due to the virus. You cannot escape life’s emergencies, so the alternative is to adjust how you react to them. Are you going to panic each time and make unwise decisions? Or do you have a personal checklist to refer to as you carefully review your options? You almost always have more time than you realize to make a good decision, as I counselled another panicked advisor who contacted me this week.
 
When the virus hit, the stock market began an almost uncontrolled decline. Now as the news mitigates a bit, emotions are driving it back up at almost the same rate. On both occasions, investors and advisors rushed to make decisions, feeling they had to act quickly. Like my flight instructor, on the markets’ way down last month I raised my hand and encouraged calm. Now on the way back up I am raising it again. Take the time to think this through.
 
Easter is a time to celebrate peace, made even more peaceful by our current confinement to our homes. Take this opportunity to consider your personal life’s checklist, and then make thoughtful decisions accordingly. There is always time to make a good decision. Use that time wisely to carefully consider your next moves, and your financial and emotional life will both be better off for having done so.