{"id":7019,"date":"2022-06-24T08:52:52","date_gmt":"2022-06-24T13:52:52","guid":{"rendered":"https:\/\/www.rbcwealthmanagement.com\/en-ca\/newsletters\/managing-your-emotions-during-volatile-stock-markets\/"},"modified":"2023-11-03T12:38:40","modified_gmt":"2023-11-03T16:38:40","slug":"managing-your-emotions-during-volatile-stock-markets","status":"publish","type":"page","link":"https:\/\/www.rbcwealthmanagement.com\/en-ca\/newsletters\/managing-your-emotions-during-volatile-stock-markets","title":{"rendered":"Managing your emotions during volatile stock markets"},"content":{"rendered":"\n

Managing your emotions during volatile stock markets<\/span><\/h1>\n

Volatility is tough to stomach, but there are time-proven strategies to help you stay on track to achieving your financial and retirement goals.<\/p>\n<\/div><\/div><\/div><\/div><\/div><\/div><\/div><\/div>\n\n\n\n

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If you\u2019ve watched television or read a newspaper lately, you\u2019ve seen the headlines: \u201cStock market volatility has everyone on the lookout\u201d or \u201cStop this stock market ride. I want to get off!\u201d<\/p>\n\n\n\n

Stock markets have been on a roller-coaster in 2022, largely due to concerns about the impact of rising inflation, fears of a possible U.S. recession and geopolitical conflict such as Russian President Putin\u2019s invasion of Ukraine.<\/p>\n\n\n\n

It\u2019s enough to give investors whiplash.<\/p>\n\n\n\n

These recent market gyrations also have investors wondering whether the return of volatility is a short-term hiccup or the new normal, and whether they should make major changes to their portfolios.<\/p>\n\n\n\n

Volatility is tough to stomach, but investors should keep market movements in perspective. Since the \u201cCOVID Crash\u201d of 2020, the S&P\/TSX Index climbed steadily from of low of 11,228.50 on March 23, 2020 to a high of 22,087.20 almost exactly two years later, on March 29, 2022. That climb \u2013 nearly 200% \u2013 lulled many investors into complacency. In fact, the volatility we\u2019ve experienced recently is normal in terms of historical market behavior \u2013 the long-term market trend is up, but along the way there have been periods of volatility like this.<\/p>\n\n\n\n

In times like this, it\u2019s important not to let your emotions dictate your actions. Remember, as your advisors, we\u2019re here to help you put market volatility into perspective and stay on track to your long-term goals.<\/p>\n\n\n\n

The pitfalls of investor psychology \u2013 and how to avoid them<\/h2>\n\n\n\n

Experienced investors understand, intellectually, that market corrections are a natural part of the investment landscape, and that they should look beyond the headlines for guidance. Yet humans are emotionally wired to desire more of what gives us pleasure and less of what gives us pain. These crosscurrents often clash when we invest.<\/p>\n\n\n\n

Certain behaviors \u2014 such as selling stocks during a market downturn \u2014 create \u201creturn gaps.\u201d A return gap reflects the difference between the average return for a fund or index and what the average investor earned within the same investment.<\/p>\n\n\n\n

That gap exists because that average investor, concerned about market corrections, often will pull out of the market, missing the recovery period and the ability to increase their return.<\/p>\n\n\n\n

Even after crafting a personalized investment approach and financial plan, some investors can react in the moment or adhere to long-held beliefs that may undermine returns. Those factors, called behavioral biases, are subconscious tendencies that drive an otherwise rational person to act irrationally.<\/p>\n\n\n\n

Here are several common behavioral biases that can affect investment decisions:<\/p>\n\n\n\n