For those of you who have watched the Netflix documentary 'Tiger King: Murder, Mayhem and Madness' you'll probably agree that it's no surprise that it's fast becoming the hit show of the pandemic. Just when you think the story can't get more bizarre, the next episode proves us wrong. We get the same feeling these days every time we turn on the news.
During times of severe turmoil and uncertainty, near-term planning becomes extremely challenging. Whether it's a June wedding that after months of planning may end up being conducted via Zoom, or just tracking down a decent roll of toilet paper, life's daily routines have become real challenges.
Planning for events in the future such as retirement needn't be fraught with the same uncertainty, but it's sometimes tough to see beyond the current crisis. This reality is part of a growing body of work known as behavioral finance. Essentially, how our human nature effects our financial life.
In his book The Behavioral Investor, a leading expert in the field Daniel Crosby notes that "humans are wired to act; markets tend to reward inaction." His point is that we are instinctively wired to have a fight or flight reaction to stressful events. This innate response mechanism tends to push us towards heightened optimism during boom times and undo pessimism during periods of crisis.
When planning for the long-term, ignoring our instincts is often the best course of action. When planning for the near-term, grabbing that extra bottle of wine or twelve pack of toilet paper makes perfect sense.
If you find yourself concerned about your long-term finances, the best action to take is a thoughtful review of your plan. Chances are, the financial plan that made sense prior to the pandemic still makes sense, but please be sure to update us on changes to your specific situation, goals or objectives.
Stay safe "you cool cats and kittens".