Better Financial Health in 15 Minutes (or less!)

The Market Is Not a Mood Ring: Finding Calm in Financial Turbulence

• Stacey Hyde

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When markets take a nosedive, does your anxiety spike? In this enlightening episode of Better Financial Health in 15 Minutes or Less, we tackle the question every investor faces during turbulent times: should you worry when the market dips, or should you just chill?

The answer might surprise you. Drawing on decades of market history, I explain why corrections (10% drops) happen approximately every 18 months, yet only two out of ten years typically end with negative returns. This disconnect between how markets feel and how they actually perform over time creates a psychological challenge for even the most disciplined investors.

We explore the dramatic case study of 2020's market—starting strong with nearly 5% gains, plummeting 34% during the COVID panic, yet finishing the year up an impressive 18%. This roller coaster perfectly illustrates why making emotional decisions during market downturns can derail otherwise solid financial plans. I share a real client example of how patience during market turbulence not only preserved wealth but created unexpected opportunities for enjoyment later.

Most importantly, you'll learn a practical framework for assessing whether market anxiety should trigger action. Has your time horizon changed? Has your risk tolerance shifted? Do you need the invested money within five years? If not, the best move is often no move at all. Remember my favorite saying: "The market is not a mood ring." It doesn't reflect our daily emotions, and successful investing requires looking beyond temporary fluctuations toward your long-term financial goals.

Ready to transform your relationship with market volatility? Listen now and discover how to find calm amidst financial turbulence. Share this episode with someone who might be feeling market anxiety—they'll thank you when the inevitable recovery arrives!

Envision Financial Planning. 5100 Poplar Avenue, Suite 2428, Memphis, TN 38137. (901) 422-7526. This communication is strictly intended for individuals residing in the United States. Advisory Services offered through Envision Financial Planning, a Registered Investment Adviser.

Speaker 1:

Hi, I'm Stacey Hyden. I'm back with another episode of Better Financial Health in 15 Minutes or Less, and what I'd like to talk about today is should you worry when the market dips or should you just chill? And the short answer is most of the time you should just chill. Like, for example, this year started out bad, it's recovered, now it's gone back again. You know we call it the tariff tantrum, but I think what's important to look at is, in most years there is a drawdown, and history says that the market corrects down about 10% every one and a half years, but that doesn't mean that the markets were actually down that much in any particular year, and so we call that 10% a correction. If markets are down 20%, we tend to call that a bear market, and so and they can be scary it feels terrible. I'm not even going to pretend, but, like I said, in most years, even though there is a correction, or in every other year, there's a correction, most of the time the markets don't wind up a year down. If you kind of look at history, it's about two in 10 years are going to be negative and the rest are going to be positive. I also think it's interesting to note that the market has averaged around 10%, and when I say the market, I'm talking about the S&P 500 has averaged about 10% all the way back through the Great Depression, but there's never been a year where the market has returned exactly 10%. So that's the average, but some years it's up 30%, some years it's down 20. Some years it's up three. It's all over the place. You just have to be patient. So what I would cause you to do is, when you're feeling stress around these market pullbacks, just take a second and check yourself. Is it your plan? Hopefully you have a plan, or is it just the headlines causing you to become nervous? Because if your time horizon hasn't changed, if your risk tolerance hasn't changed and you don't have a need for the money that you're investing in the next three to five years, nothing has changed to cause you to take action.

Speaker 1:

Sometimes that's the hardest thing that we do as advisors is telling people the answer is to do nothing. I actually had that conversation with a client yesterday. We are not going to change anything. You are appropriately allocated for your risk tolerance. We have some stuff that does well in an up market. We have some stuff that does well in the down market and we have some other strategies that help kind of protect all along, but they are giving up upside for that protection because there's this behavioral trap we tend to project what has happened most recently into the future. So if markets are up and they've been up 20%, 30% we tend to project that forward. If the markets are down, we tend to project that forward. So it's real easy to do that. But neither of those is correct. The markets are going to go up and go down.

Speaker 1:

So what should you do instead? Stick to your plan or tweak it. You know we have been sending out risk questionnaires to clients and I would be willing to bet a lot of money that right now clients are much more realistic about what their risk tolerance is, because they know what they felt like with this anxiety with markets turning back. So we have had some clients that said you know, if it's not going to hurt me, I'd rather take a little less risk, and that's a valid answer. But then there's some where, like you really can't afford to. You need to take that risk and you can get through it. They were actually surprised their account was up for the year and you should not check your accounts every day. Even if they're up, you tend to peg your account to the highest value you've ever seen, and so the pain of those losses is magnified.

Speaker 1:

So I want to give you some information about 2020. So from January 1st 2020 to February 19th, the market was up 4.81% Great start to the year. Month and a half up almost 5%. But from February 19th to March 23rd, when the market bottomed during the COVID pandemic, markets dropped 34%. It was awful, but if you look at the S&P 500 from January 1 to the end of the year, it's actually up 18%.

Speaker 1:

I remember having a conversation with a client during that time wanted to sell out of everything. They're like, stacy, we're going to lose it all. I'm like I promise you you're not, you're good, we've got the money that we need to send you for your lifestyle this year. Let's just sit tight. And since you can't travel, can we reduce what you're sending? They said, sure, so guess what? We didn't do anything. Their account recovered, they made money. They were kind of shocked.

Speaker 1:

So when it came time the next year, we're like okay, as soon as you can travel again, where do you want to go? Because we have all this extra money that you didn't expect to have. So that's why some of the best advice we can give is to not do anything or to get into some of the crazy investments that people have been asking us about lately. So one of my favorite things to say is the market is not a mood ring. You have to stay focused. It doesn't change day to day. You have to just be patient and invest for the long term and make sure you've got enough safe stuff to get you through the inevitable down times. Thanks for tuning in. This has been another episode of Better Financial Health in 15 Minutes or Less.