“Long-term investment success is almost totally a function of how one emotionally handles declines in the equity market, as opposed to how one’s portfolio handles them.”
– Nick Murray
The above quote by Nick Murray obviously refers to the ups and downs of the share market and our individual responses to fluctuations and downturns. However, upon reflection this might also be a metaphor for a broader life lesson that investing in the share market might have to teach us, regarding staying focused and sticking to our plans even when presented with unforeseen challenges and changes.
When Nick Murray refers to emotionally handling declines in markets and investments, it is an opportunity to reflect on what attributes he may be referring to:
– Focusing on the facts and what you can control
– Keeping things in perspective
– Committing to a plan and long-term objectives
– Ignoring or filtering the noise of the 24-hour news cycle and fact checking information
– Remembering the lessons that history has taught us
– Diversifying to ensure our ‘eggs are not all in the one basket’
While the above are qualities that can lead to increased investment outcomes, they could also be useful qualities when applied to our approach to life more broadly, and specifically if we perceive certain areas of our lives may be causing us stress.
Our approach to investing in the share market may provide us with an emotional template for other areas of our lives, providing clarity of thought no matter what the situation.
Heraclitus, a Greek philosopher, is quoted as saying “change is the only constant in life,” and if we are to learn from history this statement bears truth. The parameters around investing and the share market will always change over the long term, and it is simply not realistic to think that as a long-term investor we will not be presented with a every changing landscape.
The ever-changing landscape we incur in the share markets may be different to relationships, employment or business variances, but our approach to these situations can be similar. By keeping things in perspective, understanding our long-term objectives, and filtering out ‘noise’ from whatever sources that are not helpful can provide us with the ability to think and make decisions with clarity, while armed with the facts to make the best possible choices.
Feelings and emotions can be a surprisingly powerful tool when we wield them correctly, however the trick is to not let your emotional matrix override your logic, whether it be in your personal, business or investment sphere. Stopping for a moment to recognise and admit to yourself that you are feeling fearful or frustrated allows you to judge whether you are best placed to make decisions or act in that moment, or admit to yourself it may be better to think through the situation and make a decision at a later date when you are not clouded by negative thoughts and fears.
At Income Solutions we believe that the best way to ‘emotionally handle’ your finances and investments is to adhere to a structured process and plan that reflects your individual circumstances and long-term goals.
Referenced for this Blog:
#blog #financialplanners #incomesolutions #nickmurray #emotions