If you fly on a commercial airline enough times, eventually you’re going to experience flight turbulence. Sometimes it lasts for just a few seconds and at other times it can be more pronounced. But whenever it presents itself, that initial uncontrolled feeling of helplessness, doubt and often fear is always there. In many ways, flight turbulence can offer an insight into how we should learn to deal with stock market volatility.
There are many great ways to prepare you and your portfolio for future stock market shocks, which I wrote about extensively HERE, but when you’re already in a period of significant volatility there is really not much you can do other than changing your mindset and reframing your mental perspective from negative to at least neutral. And that’s where the flight turbulence analogy can help.
If you want to travel from London to New York then you’re going to have to fly. Likewise, if you want to achieve any long-term financial goal, chances are that you’re going to have to invest some of your money. An 8-hour flight is invariably going to experience some degree of flight turbulence and when it does the brain can go haywire in relatively new flyers. Having had little or no experience of turbulence, all manner of thoughts enter the head with the dreaded crash scenario being the worst. We’ve all been there!
But over time, more experienced and frequent flyers tend to come to terms with what flight turbulence is, having encountered it more often, completed flights safely every time and possibly gained an educated understanding of what turbulence is. Whether it’s caused by wind, jet streams or pockets of rising air, experienced flyers learn to place their automatic and emotional reaction to turbulence in check, replacing it with a more rational, informed response.
Experienced flyers learn to place their automatic and emotional reaction to turbulence in check, replacing it with a more rational, informed response.
Frequent flyers tell themselves that they’ve been through this before, it’s a normal part of the flying experience and statistically nothing to be scared of. Yes, some flight turbulence can still be truly scary even for experienced flyers and some people deal with it better than others, but ultimately flight turbulence is common, normal and very, very unlikely to lead to the worst case scenario that’s playing out in your head.
And it is the same process when it comes to investment volatility and stock market corrections. If you’ve initially set up your investments correctly and in accordance with your objectives using a financial plan, then any ‘turbulence’ that you experience within your investment portfolio now should be anticipated and viewed as nothing more than the normal gyrations of the investment markets.
So, when the markets get rocky think about your experiences of flying and the turbulence that you’ve encountered. You still made it to your destination right? If you want to get to New York then you have to fly and sometimes turbulence is part of the price you pay to get there.