The recent market turbulence seen in March has reminded us once again that investing comes with its share of volatility. But while it can be unsettling to see your portfolio's value fluctuate, it's important to remember that market ups and downs like these are a normal part of the investing world.

 

During such periods of market volatility, it's easy to get caught up in the moment and make impulsive decisions based on fear or uncertainty—which could hurt your portfolio's performance in the long run.

 

Beyond the numbers: How emotions impact your decisions

 

Investing can be a roller coaster, so it's crucial to remember we're all human, meaning we're prone to biases based on emotional forces—particularly when the market is volatile.

 

Examples of biases to watch out for include:

 

Confirmation bias. This bias occurs when people specifically look only for the evidence that reinforces their beliefs, and discount any contradictory facts they come across. When investing, confirmation bias can result in holding onto a stock for too long or putting too much faith in a stock or industry.

 

Selective thinking. Similar to confirmation bias, when investors fall prey to selective thinking, they focus selectively on information supporting their beliefs while ignoring other relevant information—for example, zeroing in on a company's positive earnings report while de-emphasizing negative news such as management or regulatory issues.

 

Loss aversion. This bias reflects the human tendency to feel losses more deeply than gains. When investors give in to loss aversion, they might stay invested in a failing stock in the hopes that they will eventually gain back their loss. This leads to the possibility of an even greater loss if the stock continues to decline.

 

Strategies for staying focused on long-term goals

 

Investing biases can be tricky to navigate—especially because our emotions are involved. And while these biases are a natural part of the human experience, it's important that you don't let them dictate your financial plans.

 

If you're feeling unsure about an investment decision, don't hesitate to reach out to me to help you stay focused on your long-term goals and objectives. This is particularly important during periods of volatility where you may get caught up in short-term gains or losses.

 

Don't try to time the market

 

It's equally important to resist the temptation to time the market. "In normal market conditions, trying to time market participation is difficult. During periods of high volatility, timing the markets is almost impossible," Michael Sager, Executive Director, Multi Asset and Currency Management CIBC says.

 

Here's what Sager advises for volatile times: "Focus on long-term fundamentals, such as which asset classes have the most attractive long-term expected returns," he says. Other best practices include limiting how often you check your portfolio. Meeting with me regularly so we can assess your portfolio together is one of the values of working with me.

 

Investing can be a bumpy ride, but market fluctuations are a natural part of the process. By working together, we can continue to make sound decisions based on your long-term investment objectives.