How to escape the market meltdown mentality – FINANCIAL
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How to escape the market meltdown mentality

David Kaufman: None of us can predict how we will react during a time of extreme stress if asked when all is calm.

As I write, the world’s financial markets are experiencing their worst begin to a brand new year ever. As is a fact of life during the most turbulent times, there is truly nowhere to cover. Not in China. Not in Europe. Not in the U.S. And many definitely not in Canada.

‘Ocean of fear’: Canadian investors sitting on record cash pile risk billions in lost returns

Investors are watching as a large area of the gains earned during a bull market that lasted almost seven years wither before their eyes. It is not easy for those not endowed with investing superpowers to harness the intellectual side of the brain that tells them “these things happen,” instead of giving to the more visceral flight reaction of “how will i get off?”

Advisers across Canada are, no doubt, fielding calls from the best of investors grasping for explanations and wondering if it’s time for you to break the glass “in case of emergency.”

These advisers reminds their customers that volatility within the markets is a very common side effect of investing and that “this, too, shall pass.” They will also remind them they covered all this in numerous meetings on risk tolerance, and that the clients were totally sanguine concerning the possibility of enduring short-term losses within the pursuit of long-term gains. Furthermore, they will remind these clients that the most amateurish move of all is to find into rising markets then sell into falling ones.

Still, the advisers’ admonitions and protestations notwithstanding, a number of these clients will indeed “tap out,” because they simply can’t go anymore. They’ll, not less than a short time, be insulated in the possibility the worst is yet to come, but also impotent to capture future gains as markets eventually submit their favour.


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