Weather the Storm
August 2, 2019
Having a strong foundation is key
There is no doubt that investing can be quite daunting. With so many variables influencing the market and the ever-looming possibility of a downturn, it is sometimes difficult to find comfortable footing. However, I believe that being confident in the market and your investments is something that can be achieved by anyone willing to put in the work. When planning for your financial future, it is imperative that you build a strong foundation. I like to refer to this as your Emotional Armor®. This will not only ensure that your portfolio is set up to thrive, but will also help shield you from the emotional turmoil that many investors experience.
Confidence in the market
One of the key factors to building strong Emotional Armor® is having confidence in the market. Now, I’m not saying that you should dive in head first on nothing other than blind faith. Instead you should construct a system which instills in you an unconditional belief that the capital markets will increase over time. Now, how you formulate this belief is ultimately up to you, but it must be robust. Think of it like a trip out to sea. Would you rather take a cruise ship or a small dinghy? Even though both are perfectly adequate for keeping afloat, the cruise is obviously the superior option. Choosing the cruise will provide you with comfort, security and the confidence that you will reach your destination regardless of weather conditions and you’ll have some fun along the way. The dinghy on the other hand is afloat in a sea of uncertainty! Rough waters and ominous storms are dangerous if not impossible to navigate and you certainly won’t have a good time. The point is, the more robust your belief in the market, the closer you get to smooth sailing. Here are some of the reasons my clients and I have faith in the long-term success of the capital markets, I recommend using these as a starting point for building your own Emotional Armor®.
- Innovation rests for no one: If someone told you in 1997 that the online bookstore Amazon would eventually be the most valuable public company in the world, launching rockets into space and shipping over 5 billion products to customers’ doorsteps each year, you would probably think they were off their rocker. But the monstrous growth of Amazon is a perfect example of the economic power of innovation. Nowadays you can have virtually any product delivered right to your front door in just 2 days, and if that isn’t innovative then I don’t know what is. Business are constantly striving to improve and expand in ways that would have seemed impossible only a few years ago and this innovation is constantly contributing to the growth of the economy in domestic and international markets. Innovation is the force that has driven our society forward for thousands of years and I don’t see it stopping anytime soon.
- Population growth: As population rises so does the demand for all goods and services, and to accommodate this increase the market will inevitably grow with it. Markets adjust to their environment and naturally adjust to reach an equilibrium. Therefore, to properly handle the increase in capital that comes with an increase in population and to maintain equilibrium the markets have to grow.
- Businesses prioritize profit: Increasing or maintaining profits is a primary goal for almost all businesses. In fact, if they didn’t they would likely go out of business. Because of this simple fact; business is highly incentivized to act in a way that best ensures the financial security and growth of the company.
- High Ranking Employees are rewarded for success: CEOs and other senior executives often receive compensation that is directly tied to the performance of their companies. Whether it be in the form of company stock or other bonuses, the value of this compensation rides on success of the company. This gives CEOs a great deal of motivation to do whatever it takes to maximize profits for the sake of the company and its shareholders. However, this goes both ways, and if the company does poorly it is likely the CEO will lose his job. This alone is extremely strong motivation for these individuals to make economically viable decisions as their livelihood depends on it.
What works for you
At the end of the day, what makes up your Emotional Armor® must be determined by you. It should strengthen your confidence in the market and in your investments and act as a sturdy foundation for you to stand upon as you tackle your present and future financial goals. And if you’re hungry for more information about building your Emotional Armor® you can download my free Emotional Armor® handbook here.