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Is the Sky Falling? How to Handle Market Volatility

October 22, 2014

 

Stock Market Volatility

Spoiler alert: no, the sky is not falling. Don’t let the financial media get you riled up when they start trying to develop an emotional frenzy. When you start hearing dramatic reports about the stock market from media outlets, it’s important to understand that the actual data paints a very different picture than the talking heads on your TV or radio.

There’s a reason for that! News outlets have something to gain from creating a highly charged emotional environment – they get more viewers and more engagement. And nothing drives more people to tune in than negative emotions like fear, anxiety, and panic.

Financial media outlets often push stories to get a reaction out of their audience, so keep this in mind the next time you hear a news anchor making doom and gloom predictions about the market.

In today’s episode, Brian and Bo go beyond common sense in order to help you understand how financial markets work when you invest for the long term. They talk about how you can manage your emotions during these times when it’s all too easy to irrationally give into an atmosphere or group panic, and they give tips on strategies you can use to make the most of swings in the market.

You will learn:

  • What volatility really is…
  • …and what market volatility has to do with puppies. (Yes, puppies.)
  • The right perspective to keep when thinking about market volatility.

Brian and Bo also share advice for managing your own emotions when we experience big changes in the market:

  • Know where you are in terms of your long term investing plan.
  • Understand all aspects of risk. It’s not just about risk tolerance!
  • Recognize your own blind spots and know your own experiences will shape your perspective and behavior.
  • Accept that you will need a lot of perseverance to hang in for the long haul, but understanding the cycle of market emotions can help you manage your own.

The guys wrap up with a discussion of the financial tools and strategies you can use to handle market volatility wisely – and come out ahead of the average investor who tends to buy high and sell low.

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