These are definitely challenging economic times. As investors, we're living with great uncertainty of how the markets will respond to the global economic crises. In the US, it is also complicated by a dysfunctional political process. Are you tempted to call your adviser and yell "get me out"? GMO syndrome according to Larry Swedroe, Principle and Director of Research of Buckingham Family Financial Service) I hear that many people are wondering if they have the stomach once again for the risk roller-coaster ride.
There's always a penalty -- emotional and financial -- for spending beyond one's means and we are certainly experiencing both the financial and emotional fallout from years of irresponsible budgets and spending. If we're fortunate to be good money managers, we'll be able to withstand the financial implications of these uncertain times since we've prepared ourselves financially for such uncertainties. But, preparing oneself emotionally is a very different matter and oftentimes requires a unique set of skills.
The ability to withstand loss and tolerate the anxiety that accompanies such loss is a skill set that successfully disciplined investors have learned so they can "stay their course".
Unfortunately, they are in the minority and the herd will be jumping out again as they did in 2009 if the historical trends hold true.
There are many things we can do to equip ourselves emotionally to be smart and disciplined in these times so that we don't suffer unnecessary financial upsets and loss. First and foremost is to determine whether your current plan and strategy is valid for today. Get in touch with the professional who can help put that into perspective. If you are part of a company savings plan, ask your company plan representative to determine that answer with a consultation for you. If you have a personal investment adviser, reach out and get current on whether your strategy and plan still makes sense.
Know your comfort zone for perceived risk and do what you can to increase your sense of control with understanding the value of planning for a greater sense of security. Your adviser may recommend tweaking your asset allocation and/or using funds instead of individual investment vehicles, so you are taking a more calculated approach to your exposure for risk of potential loss.
If you know that you're the type of investor who could potentially succumb to the "GMO syndrome" with hearing the potentially catastrophic predictions and bad news that sells media, avoid such bombardment of bad news. I'm not suggesting you totally isolate yourself, so stay in touch with those who can give you concrete and valid feedback about your individual situation.
Lastly, it is always wise to understand yourself better and be aware of your attitudes and tendencies so you can incorporate that information into your financial behavior and planning, Choose and maintain suitable personal strategies that give you financial return as well as peace of mind. The downside of not knowing your tendencies is the likelihood of yelling "get me out" at just the wrong time.