Once every decade or two something happens that leaves an indelible mark in our collective memories. 9/11 certainly falls into that category, (now almost a generation in our past), as does the onset of COVID-19. Most of us will always remember where we were and how we lived our lives in mid-March when the inevitability of the virus became apparent. In many ways, this was when the world stopped turning.
Beginning with the ancient Greeks, and certainly since the mid 19th century, we have known that the Earth turns on its axis, completing one revolution every 24 hours. Figuratively at least, for the past six months this has changed. Up is down and down is up. Everything that we knew as “normal” has changed, at least for now.
Where Do We Go From Here?
So, the big question is how do we rationally go about planning and investing after the pandemic? Well, perhaps songwriter David Byrne (Talking Heads) might have a suggestion from the refrain in the song Once in a Lifetime, “same as it ever was.”
That’s right. Perhaps the last bastion of rationality in our crazy, crazy world today can be found within the global capital markets. For the main, if you are acting on a long-term financial plan based on what matters most to you, the fewer decisions you make in a time of crisis the better. Since all of us have a strong, hard-wired tendency to react, to do something, the temptation can be hard to resist.
Doing something, (like getting out of the market), in response to current events can easily undo your planning and put you into an endless cycle of reacting to nearly everything that happens, positive and negative. The best way off the “reacting bus” is to never get on it in the first place.
Is Everything Really Different Now?
It’s easy in times like this to think everything is different now. Granted, the world hasn’t been through a ravaging pandemic like this in more than a century. However, we have a reservoir of nearly a century of detailed market data that provides excellent guidance. Your overarching focus should always be on your investing lifetime. For instance, if you are several years away from retirement, your investing lifetime is not a few years but the entirety of your life expectancy and that of your spouse (if applicable).
Behavioral economics provides an interesting dichotomy. Financial planning starts with movement away from the status quo, breaking through inertia. In other words, doing something. Ongoing progress, however, revolves around staying put once your planning framework is in place. The behavioral problem is that it can be difficult to slow the momentum to “do something” after inertia is cast aside.
Stay With Your Plan
Add to this the endless babble by traditional financial services firms and the financial media and it’s no wonder many individuals struggle to maintain the discipline needed to stay with their financial plan.
The importance of real financial planning (not based on investment products) has never been greater. You need an ally and advocate to make sense of the post-pandemic financial world. Start there. Ready for a real conversation?