Fear is healthy. It’s an essential instinct that has kept our species alive. We all know that gut-level feeling of fear, followed by a reaction of fight or flight. When fear strikes in the investment world, we often see investors trip and stumble as the urge to flee takes over. A race for the exits can be costly, and with the benefit of hindsight, is often the wrong reaction to the many varieties of panic, doubt, what-ifs, truly bad news, and sudden change that investors face.
When markets, politics or global tensions get scary, what are the other choices besides fleeing the scene?
When a car is bearing down on you, that triggers fear and flight. Explosions, stampedes, avalanches, flames — they all deserve immediate flight for self-preservation.
But not every unsettling situation merits flight. If we immediately ran from every loud or unfamiliar noise, we’d be on the run all day long. Many circumstances that feel dangerous at first turn out to be false alarms or harmless surprises upon closer inspection.
In the investment world, unexpected events and provocative predictions can invoke fear that’s out of proportion with the real threat level. Apocalyptic headlines like “Largest bomb dropped; indicators plunge,” or “Profits vanish” are enough to scare the heck out of even seasoned investors. Yet the thoughtful investor absorbs first and acts later, or better yet, takes a breath and has a conversation.
Max and I have been through many bursts of investment fear, more than I care to count in my case. Because we can put these scary events into perspective, and prepare for many of them in advance, we rarely counsel our clients to flee. (Remember, flight almost always means selling as prices fall, and buying back in as they rise — that’s sell low / buy high, the worst possible combination.)
Longtime clients understand our role as a buffer against fear and uncertainty, so they can be confident their portfolios stay on track. Here are a few of the fear-fighting tools and techniques we use at Osbon Capital to help clients stay calm when others are heading for the hills:
A true financial partner understands you, your family, and your goals so he or she can stay in touch with you during key fear events, and will call you if you haven’t been speaking up much lately.
Instead of fear as an enemy of success, consider what family investment strength would do for you: security, relaxation, preparation, conversations and time for important things. Osbon Capital is dedicated to getting you there, through periods of fear and of calm.
John Osbon – firstname.lastname@example.org