It was a great day until you listened to the radio on the way home from work. The broadcaster was speaking straight at you when they said the stock market had its worst day in more than a year.
Gulp.
Panic sets in. You think about your retirement savings. All your plans. Wrapping up at work is only a few years away, and now what? What happened to my investments? Should I sell?
And that’s how easy it is for emotion to influence your financial decisions.
Human instincts can quickly turn financial decisions into emotional ones. Countering emotion in this area of your life isn’t easy. But it’s possible if you have a plan.
Here are a few ways to balance those reactions when it comes to your hard-earned retirement savings:
Stay calm and don’t lose sight of your long-term retirement goals.
The news is all about attention-grabbing headlines that change every day—every hour. And when they focus on financial markets, it can be easy for retirement savers to get overwhelmed by stories about market volatility.
It’s important to keep thinking further ahead, not just what happened today or this week. Make clear retirement goals and setting a timeline to reach them.
It’s important to keep thinking further ahead, not just what happened today or this week. Make clear retirement goals and setting a timeline to reach them.
A solid plan can help anchor your emotions and help keep you from making costly snap decisions. For example, you can adjust how much you’re contributing to your retirement and the amount of risk you take. Consider boosting your salary deferral contributions to your Private Retirement Scheme each year.
Don’t forget about the gains—yours and the market’s.
It’s normal to worry about investment losses, but, don’t forget about the gains you’ve made over the years.
When markets go down, people look at their investment statements and don’t like the numbers. While that’s a normal reaction - changing your investments because of what you see on a statement isn’t necessarily rational. Sadly, no one has a crystal ball to perfectly time the decision of when to buy and sell.
Again, focus on what you can control. You may decide on a mix of investments that matches your tolerance for risk. Then set a plan to rebalance. Review your investment choices periodically to make necessary adjustments, but not so often that you get caught up in every little market flutter.
Get help from a financial consultant when you need it.
Volatile markets can make people nervous and uncertain about their decisions. That’s normal.
Keeping up on the news is good, but you know best your specific situation and how markets affect you. That’s where having a relationship with a financial consultant can help.
A financial professional can help you put together a long-term plan. Or they can just talk you through issues if there’s something happening in the news that you don’t understand. Many people feel better after talking through things with a trusted financial consultant, even if the conversation just validates what they already know.