Broker Check

Managing Emotions Is Key to Weathering Volatility

November 06, 2018

Money fuels emotions ­­– especially the fear of losing it. 

Far too often, emotions can lead to irrational behavior. With interest rates rising and the economic cycle maturing, many investors are experiencing the highest volatility in years. 

Acknowledge emotions
During periods of market volatility, investors may struggle to separate their emotions from their investment decisions. Advisors should be proactive with clients by sending messages, making calls or writing an article to let them know it’s natural to be concerned.

Advisors should remind clients, while they can't control the markets, they can control their financial plan. And a strong plan can withstand volatility. Let your clients know you’re available to talk if they have concerns. This may also be a good time to schedule meetings to review their portfolio and their situation.

 Put market volatility into perspective
It seems every year, without fail, the market goes through a couple of rough patches. After years of low market volatility that lulled many investors into believing markets only go up, recent fluctuations are providing a healthy reminder that market corrections are a normal part of investing.

The key to getting through unexpected turbulence is to understand swings in the financial market are normal—and relatively insignificant over the long haul. 

Stock market declines are a natural part of the investing cycle but are also the last thing most investors want to experience.

Educate your clients
Client communication and education are important components you should adopt to ensure clients understand how their portfolios are serving their overall financial goals.

Helping clients keep the current market news in perspective is important, especially during periods of volatility. Framed in the larger context, downturns or other worrisome factors can often be minimized.

Emphasize the importance of a disciplined investment approach
As a financial advisor, it’s your job to remind clients successful long-term investing requires a solid financial strategy and the determination to stick to it. Don’t let volatility derail your plans.

The markets have historically rewarded over the long term, so keep conversations directed at the big picture and reinforce the need to stay the course.

If you would like to learn more ways to help your clients weather market volatility, contact Iron Point today for a no-obligation coaching call.