In times of market uncertainty, wealth often transfers from the impatient to the patient. This timeless truth feels particularly relevant today, as markets respond to shifting economic policies and global events with characteristic volatility.
The market remains humanity's most sophisticated pricing mechanism—processing millions of transactions daily, each representing judgments on companies' future earnings. Yet behind this elegant system lies a fundamental tension: our sophisticated financial markets meet our primitive human psychology.
When volatility strikes, our reptilian brain activates "fight or flight" responses that served our ancestors well but betray us when facing market downturns. Sitting back and letting markets do what they naturally do requires tremendous discipline—a quality in short supply during turbulent times.
Constantly refreshing Twitter and Facebook to absorb the hyperbolic thoughts of market pundits is detrimental to both your mental health and your portfolio. This 24/7 cycle of alarming predictions and dramatic commentary amplifies our emotional responses while rarely providing genuine insight. True investment wisdom rarely arrives in bite-sized social media posts or through those shouting the loudest.
A Tale of Two Investors
1. For Young Investors (20s-40s)
If you're in the accumulation phase with a 10-to-30-year horizon, market corrections aren't catastrophes—they're opportunities. This is precisely the time to ask: "How can I reduce expenses and invest more while assets are effectively on sale?"
Consider practical steps: Use budgeting apps to identify unnecessary spending, review premium subscriptions, work with your partner to build financial discipline, and direct any savings straight into market investments.
And for your existing investments? Do nothing. Major financial decisions made from emotional positions rarely end well.
2. For Those Approaching Retirement (50s-70s)
First, take care of your health. Life is short - forgive yourself for past mistakes, be kinder to those around you, and yes, enjoy a good red wine with Easter dinner this weekend (and perhaps another Easter egg, regardless of your age).
But regarding your investments, resist the urge to panic sell when things dip. Now is not the time to obsess over the impact of headlines and legislative policy changes. Instead, this is the time for thoughtful review. Consider your exposure to specific markets, evaluate geographic diversification, and consult with a financial adviser about sensible portfolio adjustments.
Diversification becomes increasingly crucial as your investment timeline shortens. It's your financial protection; your Kevlar against the unknown.
Understanding Market Dynamics
To own a share means claiming a stake in future cash flows. These expected returns carry inherent uncertainty in timing and magnitude. Markets aren't linear and have never offered smooth rides; it’s important to go in knowing that.
Recent market movements remind us that share ownership demands resilience. At the time of writing, many markets sit near pre-election levels. This suggests that while uncertainty exists (as it always does), markets continue functioning as designed.
Understanding that new information gets priced into markets faster than most investors can react leads to a profound insight: For most people, accepting current market prices as fair representations of value is the wisest approach. Attempting to outguess markets requires both confidence and ability.
While many investors have no shortage of the former, evidence suggests few possess the latter.
This leaves investors with a simple truth. Market turbulence must be endured as an inherent feature of equity ownership. During volatile periods, remembering key principles can prevent catastrophic decisions.
Three Critical Reminders
1. Market Timing Is a Fool's Errand
The temptation to "wait out the storm" by withdrawing from markets is powerful - but dangerous. Research consistently shows that few investors can successfully time market entries and exits.
It’s a gamble you can’t afford to lose. The cost of being wrong can be devastating, as missing just a handful of the market's best days can dramatically reduce long-term returns.
2. Annual Market Declines Are Normal
Markets fall from peak levels every single year. Current market corrections are entirely within historical norms. While this doesn't make staying invested through downturns emotionally easy, it reinforces the necessity of doing so.
3. Volatility Is Already Built Into Your Plan
Market volatility (the statistical measure of investment "bumpiness") is a feature, not a bug. Your financial plan likely already accounts for periodic declines. Significant but temporary market drops are normal events, not exceptional circumstances requiring emergency responses.
Why It’s Wiser to Wait
Things may indeed worsen before improving… or they may not. Only hindsight will reveal the truth. But we know that throughout market history, patience has consistently rewarded long-term investors.
As Warren Buffett famously observed: "The stock market is a device for transferring money from the impatient to the patient." In today's volatile markets, this has never been more relevant.
Theodore Roosevelt offered another perspective that applies powerfully to investing: "Nothing in the world is worth having or worth doing unless it means effort, pain, difficulty... I have never in my life envied a human being who led an easy life."
As we approach Easter, there's perhaps no better time to reflect on the virtue of patience. After all, Easter itself is a season that follows a period of waiting and restraint.
Markets are similarly complex in the short-term. By maintaining a long-term focus, we can benefit from the elegant simplicity of investing – a system where markets reward sensible risk-taking over time.
The Value of a Trusted Guide
Even with the best information and intentions, navigating volatile markets alone can be extraordinarily challenging. This is where the value of an independent financial adviser, specifically one who serves as a fiduciary, becomes immeasurable.
A fiduciary adviser is legally obligated to put your interests first, always. Unlike advisers who may be incentivised to recommend specific products and transactions, a fiduciary focuses exclusively on what serves your financial well-being.
Think of your adviser as a financial navigator walking alongside you through both calm and stormy markets. Their value often manifests most powerfully not in picking investments, but in preventing costly mistakes driven by emotion rather than reason.
Perhaps most importantly, a skilled adviser helps ensure your financial decisions remain aligned with your deeply held personal values and family priorities. When markets tumble, your adviser serves as the steady voice reminding you of your long-term objectives – that education fund for your children, helping with their first home deposit, your planned retirement lifestyle, your legacy, and supporting the charitable causes meaningful to your family.
These goals don't change because markets fluctuate. Your adviser helps you maintain perspective when headlines and volatility threaten to knock you off course. Your adviser can transform market volatility from an enemy into an ally on your journey toward financial security and fulfilment.
Your financial journey isn’t at its end because of short-term volatility. Trust in your plan, and in good, professional financial advice over your own fears. When you come out the other side, you’ll be glad you had the patience to wait out the storm.
Nick Stewart (Ngāi Tahu, Ngāti Huirapa, Ngāti Māmoe, Ngāti Waitaha) is a Financial Adviser and CEO at Stewart Group, a Hawke's Bay and Wellington based CEFEX & BCorp certified financial planning and advisory firm. Stewart Group provides personal fiduciary services, Wealth Management, Risk Insurance & KiwiSaver scheme solutions. Article no. 403.
The information provided, or any opinions expressed in this article, are of a general nature only and should not be construed or relied on as a recommendation to invest in a financial product or class of financial products. You should seek financial advice specific to your circumstances from a Financial Adviser before making any financial decisions. A disclosure statement can be obtained free of charge by calling 0800 878 961 or visit our website, www.stewartgroup.co.nz
