Investing With Fear 

12th of October, 2018

Some say that wolves can smell fear. It might really be that they sense it. Regardless, once a pack of wolves think they have the upper hand their aggression levels increase often resulting in a frenzied attack.

Their relentless attack further enhancing the fear of their pray.

Remind you of something?

“$50 billion wiped off Australian Markets”

“US stocks suffer worst loss in eight months, Australian market tipped to plunge”

“Panic grips markets; ASX set to extend losses”

These falls invoke our primal animal instincts.

Such volatility is where the share market gets its bad boy reputation from.

Unlike Queensland’s famous slogan “Beautiful one day. Perfect the next” it would be more apt for the ASX to use “Up one day. Smashed the next”.

Investing has as much to do with controlling your emotions and making sensible investment decisions as anything else.

It’s often said that the market will do everything it can to ensure that you take the wrong actions at exactly the wrong time. One of my trading mantras is  “Lose your head and your ass is sure to follow..”

Controlling your emotions can be difficult, especially when there are many commentators and market participants yelling about this being the start of the next GFC!

How can you keep your emotions in check? How do you make non-emotional rational decisions at a time of duress?

Our solution is to ensure that all decisions are continually made within a constant frame of reference.

For us at Calnan Flack this is exactly what our Calnan Flack Economic Cycle Action Plan provides us with.

The ability to view the market and economic action within the context of the expected long-term market action.

Understanding how far the credit cycle is, or is not, extended.

Being able to view the current market action within this framework allows us to unemotionally use our decades of market experience to take appropriate action.

In our opinion, this current market fall is not the start of the next GFC. Nor is it the start of the Mid-Cycle slowdown.

We do however see it as a warning that the long-term mid-cycle slowdown is approaching, but we see plenty of upside before we get there.

In our view, not all market corrections are created equally. Some are corrections occurring within the overall context of a market with an upward bias. See even a market that wants to go up can’t do it in a straight line. Markets must ebb and flow, back and forth.

Other corrections are much more serious and less likely to rebound strongly from their declines. These are the corrections that you really need to be wary of.

We see this current market correction as a buying opportunity, but you must have your emotions in check.

Those in our forecast service know the date where we are expecting this market decline to stop and then reverse. We see this as a buying opportunity, not a time for be paralysed by fear.

It’s also a good time to reflect on why we always say you need to:-

• have a written investment methodology
• define the time-frame you are investing in
• understand your frame of reference
• know where your stops are

Once you can honestly do all of the above you will find investing much less “Fearful” and much more “Profitable”.