🙏 On Emotions During Market Volatility 🙋‍♀️

FTSE 100 had a bad day/week. Dow Jones is shaky. Nasdaq is quacking like a :duck:, VIX volatility index is :chart_with_upwards_trend:.

Emotional stability.

“You don’t need a lot of brains in this business… What you do need is emotional stability”
— Warren Buffett

“…corrections are just a routine part of owning stocks. Instead of living in fear of corrections, accept them as regular occurrences.”
— Tony Robbins

This volatility thing, corrections, bear markets—happen all the time.

The earlier we get used to them, the better. Let’s just not invest in companies that are likely to simply go under or be extremely overvalued. This means research is important.

Repost from another topic:

On average, there’s been a market correction every year since 1900. When I first heard this, I was floored. Just think about it: if you’re 50 years old today and have a life expectancy of 85, you can expect to live through another 35 corrections. To put it another way, you’ll experience the same number of corrections as birthdays. (Note: a correction is defined as a drop of at least 10% but not more than 20%. A bear market is a drop of more than 20%).

Why does this matter? Because it shows you that corrections are just a routine part of owning stocks. Instead of living in fear of corrections, accept them as regular occurrences. Historically, the average correction has sent the market down 13.5% and lasted 54 days — less than two months.

Still, in the midst of a correction you might find yourself becoming emotional and wanting to sell because you’re anxious to avert the possibility of more pain. You’re certainly not alone. These widespread emotions create a crisis mentality. But the vast majority of the time, the sky is not falling. It is a simply a “seasonal storm.”

How bad does it get when the market really crashes? Historically, the S&P 500 SPX, +0.11% has dropped by an average of 33% during bear markets. In more than a third of bear markets, the U.S. benchmark index plunged by more than 40%. I’m not going to sugarcoat this. If you’re someone who panics, sells everything in the midst of this mayhem, and locks in a loss of more than 40%, you’re going to feel like a grizzly bear mauled you for real. Even if you have the knowledge and fortitude not to sell, you’ll likely find that bear markets are a gut-wrenching experience.

Even Vanguard Group founder Jack Bogle admits that bear markets are no walk in the park. “How do I feel when the market goes down 50%?” he asks rhetorically. “Honestly, I feel miserable. I get knots in my stomach. So what do I do? I get out a couple of my books on ‘staying the course’ and reread them!”

Sadly, many investment advisers fall victim to the same fear and hide under their desks during tumultuous times. Peter Mallouk (my co-author) told me that ongoing communication during these storms is key. Here’s what you need to know: bear markets don’t last. The 14 bear markets in the U.S. over the past 70 years have varied widely in duration, from a month-and-a-half (45 days) to nearly two years (694 days). On average, they lasted about a year.


Connection of emotions to intellect - Ray Dalio

Awareness. Bringing together conscious and subconscious together. Great for doing research and making investment decisions, as well as life in general.

“Typically twice a day, 20 minutes each time”.

Self-made fund manager billionaire Ray Dalio has been meditating for so many years, it’s been key to his success. And has he seen market downturns. Source - https://www.cnbc.com/2018/03/16/bridgewater-associates-ray-dalio-meditation-is-key-to-my-success.html

Headspace and Calm

Meditation apps—I have met so many people from all over the world who use them. Practising over time makes life easier. Especially in finance.

1 Like

“Meditation more than anything in my life was the biggest ingredient of whatever success I’ve had”
—Ray Dalio, Founder and Chief Investment Officer of Bridgewater Associates

Have you read Principles @engineer? Great book

Jason Calanacis the successful Angel investor, was an early investor in Calm.

1 Like

Good book that :+1: @shane-aurora

Forgot to mention we can all generate free feel good hormones if we simply exercise :running_woman: :biking_woman: :basketball_woman: without having to use a Peloton bike or pay Soul Cycle loads of money to be shouted at whilst spinning :upside_down_face:

The mind gets clearer. It may affect spending, eating and drinking decisions, which may have a positive affect on daily habits.

This can translate in better investing and saving decisions :woman_shrugging:

1 Like