2/27/2022 11:00:00 PM

Are you feeling anxious about your portfolio?


No one likes seeing their investment portfolio go down. How can you manage your emotions to stay on track for investing success? James Paterson, the Head of Pie Wealth and a Financial Adviser, gives some tips.

It’s normal to want to “do something”
In times like this, the impulse when the stock market falls hard for a few months in a row is to do something. Anything. Our life savings are often on the line, after all. Changing your investments during this time could end up costing your future self thousands or even tens of thousands. As well as that, feeling stressed and emotional is not a fun place to be, so learning some techniques can help. 

Staying rational is key to your success
Staying calm and rational when it comes to your investments is a key part of long-term success. Many of us will be investors for most of our lives. Investing can be a good way to build wealth over the long term, but it is not worth losing sleep or getting upset over. Market ups and downs will happen many times during your investment lifetime, and sometimes these downs will be severe and dramatic. The important thing is to take it in your stride, and try to avoid getting angry, anxious or upset.

Investing is for the long term
Investing is more about emotions than it is a high IQ. Even though we say we won’t, most in the heat of the battle decide to sell in the face of fear. Many of us know we shouldn’t react, but emotions overcome us and we do. Looking back at 2008 during the recession, the best investors were those who hung in and didn’t panic and withdraw their investments, therefore locking in their losses. I know too many 65-year-olds who sold all of their shares in 2009 and moved to conservative portfolios and are healthy enough to live to 90. They’d be going on a lot more vacations now and be worrying less about long-term care if they had held firm.

Even better were those who were buying when the world was selling. It wasn’t easy, let’s make that very clear, but they benefited significantly over the next few years as markets rebounded. Knee-jerk reaction changes based on the market can have significant financial consequences further on. Long-term investors have time to recover. Volatility is simply part and parcel of the business of investing, and that staying focused – and educated – is the key to seeing through difficult times.

Patience is the key too
Being patient means you are willing to wait until your plan materialises. Building wealth and financial security takes time and you'll likely encounter financial challenges along the way. But viewing your finances and investment portfolio as a lifelong journey can help you remain patient and stay on course despite these challenges. If you haven’t received financial advice and the last few months have been particularly unsettling, maybe it’s the time to talk with an expert. There is inherent value in a trusted relationship with someone who can travel with you on your investment journey. Another reason for anxiety could be your portfolio is not set up to suit your personal situation and risk tolerance. An adviser can help with this. 

Tips for staying calm in a market dip:

  • Don’t check your investments too often - every six or 12 months is good for most people
  • Turn your thinking around. For example instead of thinking “my portfolio is dropping”, change to say “My investments are buying more shares at better prices, which will help my future.”
  • If Facebook groups and other discussion forums are making you anxious, reduce the time spent here
  • Be careful who you receive advice from. Trusted professionals are always best. 
  • Speak to your financial adviser. Advisers can be a great support during tough times
  • Focus on the long term. Think of your investment goals that are 5 or 10 years away. 
  • Making decisions about your portfolio is best done when markets are calm, not during a dip

Information is current as at March 2022. Pie Funds Management Limited is the manager of the funds in the Pie Funds Management Scheme. Any advice is given by Pie Funds Management Limited and is general only. Our advice relates only to the specific financial products mentioned and does not account for personal circumstances or financial goals. Please see a financial adviser for tailored advice. You may have to pay product or other fees, like brokerage, if you act on any advice. As manager of the Pie Funds Management Scheme investment funds, we receive fees determined by your balance and we benefit financially if you invest in our products. We manage this conflict of interest via an internal compliance framework designed to help us meet our duties to you. For information about how we can help you, our duties and complaint process and how disputes can be resolved, or to see our product disclosure statement, please visit www.piefunds.co.nz. Please let us know if you would like a hard copy of this disclosure information. Past performance is not a reliable indicator of future returns. Returns can be negative as well as positive and returns over different periods may vary.