One thing I have learned over the last six months during a time of growing markets and economy to a sudden shift of social distancing and virtual workplaces due to the COVID-19 pandemic, is that people are motivated by two emotions: Fear and Greed.
I know reading this can almost seem insensitive or downright offensive but it’s the truth.
Think about it.
As a parent, business owner, friend, employee, spouse or neighbor, our emotions can lead us into making decisions that we can reflect back on after the emotion passes to realize maybe we could have done better.
I see this all the time with people when it comes to investment decisions.
When markets are good, people believe markets will go higher and they become eager to ride the markets higher.
And when markets are bad, people believe markets will go lower and can experience an onset of panic that if not managed can lead to bad decisions.
Take Lauren for example:
I met with Lauren last fall to discuss her plans for retirement in 2020.
We discussed moving some of her money out of the market to protect it from a market decline since she was relying on this portion of her portfolio for income.
At the time I obviously had no idea what was about to happen and was simply practicing prudent planning by making a recommendation to protect the plan she had for the money.
At the time markets were doing well and there was no reason to think that they would go down.
Well, like so many other investors in times when markets are good, she felt that the markets would continue to go up and could grow her investment assets a little higher without worry.
But… we now see this emotion called greed drove a “belief” that markets will continue to go up and unfortunately turned out to be the wrong decision.
Her emotion drove her decision-making and caused her to lose sight of her retirement goal.
Fast forward to March when the markets began seeing significant losses, her emotion shifted to fear and she began worrying that her retirement plans may not work out.
Fear had her thinking that she should move her investments to cash to avoid further losses in an attempt to preserve the purpose she has for her money.
She went from an attitude of riding the market wave higher to an attitude of wanting to move everything to cash.
I saw both greed and fear from the same person within a matter of a few months.
Emotion is a powerful thing.
The good news is that Lauren and I were able to work through the emotions she was feeling by creating a strategy that will keep her retirement plans on track.
The point is this, allowing your emotions to guide your behavior can often lead you down a path that you may not want to go down.
In good times and in bad, when emotions are fueling our propensity to act, we have to stop to realize what is happening to keep our emotions in check.
We have to remind ourselves that while these feelings are real, they should not be used to make important decisions for the future.
Now, there are times when you may get lucky in your attempt to outsmart the markets but we have to agree that getting lucky is not the same as being successful.
Luck is not a strategy and it cannot be controlled while success is clearly the result of a well thought out strategy for realizing a specific outcome.
And “Lucky” people do not have a repeatable strategy for achieving that same level of success again and cannot articulate a method for helping someone else experience that same result for themselves.
However, when it comes to successful behaviors, there are specific, repeatable things you can do to be successful in times of stress and fear.
Specifically, there are five things that I have found successful people do in good times and in bad that can be linked to their success:
- They don’t allow emotions to drive their behavior. They realize that while emotions are real, they understand that emotions can impair judgment and can lead to bad decision-making.
- In good times or in bad times …in periods of fear or greed… they remain focused on their goals and don’t get too distracted with current events or temporary set backs.
- They focus on areas of their life that they have control over and set aside anything that they cannot control that only leads to worry and anxiety.
- They manage their money differently than the average person. When it comes to money they: Ensure that they have access to cash, Work to control the outcome, Focus on creating passive income, Protect the purpose they have for their money, Strive for consistency over volatility.
- They understand that success is the result of a well-thought-out strategy that creates an intentional and controllable outcome.
So, how about you? Are you focused on the media, markets and Coronavirus or are you focused on your goals?
No one can blame someone for having some uncertainty about what is happening in our world right now with the Coronavirus.
We are experiencing an unprecedented event that is challenging our way of thinking, our way of life, and for some their families.
This virus should be taken serious and is a wake up call to remind us that life is fragile and the comfort of the past is not necessarily the reality of our future.
The two things that come to my mind through all of this are Gratitude and Action.
We need to be grateful for what we have.
Regardless of where you are in life, what your going through or what you have experienced, there is good.
In times of fear it is helpful to physically write down all the things that you are thankful for.
This exercise can help provide some perspective in a time of uncertainty.
And for Action…
There are many sayings that motivate and encourage action such as “Just Do It” or “The Time Is Now”.
These sayings are commonly associated with achievement and success.
We have to remind our self that fear and uncertainty leaves you like a fan sitting in the stands watching as the game is being played.
The game controls your emotions and you have no control over the outcome.
There is a reason that the most successful people are on the field playing the game and are focused on things they can control.
They realize that things are up to them and if they sit around waiting for some event to happen or situation to change then they are leaving the outcome to chance and their goals left unmet.
So the question you have to ask yourself right now is this:
What are you doing right now to move yourself closer to your long-term goals?
Are you letting circumstances outside of your control prevent you from taking action?
Are you allowing thoughts such as…I’ll do something after all this passes…I’ll do something after the market gets back to all time highs…I’ll wait until after we can get back to work…
Are you allowing these things to stop you from taking action?
The truth is we all have our reasons and excuses for not taking action on a normal day, much less when there is a pandemic rippling through our nation.
So, it is more important than ever to overcome these thoughts and do what is necessary through it all to make sure you continue to play the game and move the football down the field.
With all that said, my team and I are here to help you stay on track by offering the guidance you need to navigate through this uncertain times to move you closer to your goals.
Hope to hear from you soon,