March 13, 2020
We have to acknowledge the short-term pain felt by long-term investors when financial markets tank.
You can’t explain away the stress of daily stock market plunges by telling people to keep a long-term perspective. The anxiety felt in the current market upheaval is all the more intense because it was triggered by a virus that is spreading quickly around the world. Stress is coming in stereo these days.
Let’s look at some things you can do to limit financial stress. One is to stop endlessly checking what the stock markets are doing. A rapidly plunging market sends a message of crisis. Spare yourself. Check in once a day or less, and remember what has happened in previous stock market declines. Stocks find a bottom and then rally. The market does not go to zero. It bends, but never breaks.
Also, stop checking your portfolio online all the time. Current losses are no more indicative of your results than the peak of the market numbers you were looking at a month or two ago.
Another tip is to not equate what the major stock indexes are doing with what’s happening in your own investment portfolio. Bonds are soaring in prices these days as stocks fall. You’re still losing money if you have 40 per cent of your portfolio in bonds, but the damage isn’t as severe as if you were 100 per cent exposed to stocks.
One more tip is to focus on developments that can actually help your personal finances. Falling interest rates are a sign of stress in the economy and concern about a recession. But they also mean a lighter interest burden on people carrying debts. The interest rate on your home equity line of credit and/or variable rate mortgage should have fallen 0.5 of a percentage point as a result of an interest rate cut by the Bank of Canada last week. More cuts could be coming.
If you have a mortgage coming up for renewal or need to refinance your mortgage, falling rates will save you money. My colleague Rachelle Younglai has reported on how lower interest rates have sent the mortgage industry into a frenzy, as homeowners and buyers race to take advantage of cheaper loans.
Gasoline prices are falling as a result of a big decline in the price of oil, which is bad news for the finances of the entire country and not just energy-producing provinces. But lower gas prices do lighten the load on financially stressed households. GasBuddy.com says the average price of a litre of gas across the country has fallen about 7 per cent in the last month.
The daily flow of bad financial news will continue a while longer. Find your zen in the short term and remember that the long-term view on your investments is always better (really).
This Globe and Mail article was legally licensed by AdvisorStream.