More than two years ago, we wrote an article entitled “Out of Sight, Out of Mind”. This article considered how the frequency and speed with which we are able to receive information today can have a negative impact on achieving our long-term goals.
Never has this been more relevant given the pace at which the current situation is developing and impacting not only financial markets, but also our daily lives.
Unfortunately, an environment such as this inevitably causes people to shorten their time horizon and think in days, weeks and months, rather than years, decades and generations.
As humans we are hardwired to react like this, however, when it comes to making investment or financial decisions, shortening our time horizon usually results in negative consequences.
Now, more than ever, it is important to look ahead and focus our attention on our long-term goals and what will help us achieve them.
With this in mind, we should be refocusing our thinking on the following points:
- Over time, stock markets and the global economy have survived multiple world wars, famines, pandemics, terrorist attacks and financial crises. After each of these events, they have eventually come back stronger.
- Those that have invested with a long-term perspective have all benefited from the growth of stock markets despite their fluctuations.
- Periods of volatility create attractive buying opportunities for those who are already contributing regularly, have surplus cash or have a diversified portfolio that can be rebalanced.
- Maintaining a healthy cash balance or emergency fund is central to good advice and is designed for times like these.
- What is our long-term objective and has this changed? If not, why change your portfolio which was designed with this objective in mind?
- Checking a portfolio more often only embeds a short-term mindset and increases our chances of making irrational decisions.
Having set up a financial plan with you, at times such as these our main role is to ensure you remain focused on your long-term objectives and avoid making decisions based on short-term views.
If you would like to discuss your financial plan or investments with us at this time, please get in touch.
After last night’s announcements, we also want to reassure you that we are still working (remotely and safely) and looking after our clients during this difficult time remains our main focus.
From all the dedicated team at Taylor Money, we hope you are keeping safe and well.