Have at least a basic understanding of the likely range of outcomes for a particular investment over a specific time period.Make sure you have a thorough understanding of the particular role and purpose that each investment is playing in the portfolio Utilize the opportunity to comb through your existing portfolio.I must emphasize that this list does not constitute investment advice, and of course should be discussed with investment professionals that are knowledgeable about your own specific circumstances. The following is a list of common sense general ideas and guidelines. So although panic cannot and should not be eliminated, what steps can be taken by a thoughtful investor to ensure that the likelihood of panicking within the investor arena is minimized?
#DONT PANIC BUTTON FULL#
The full article can be accessed here.Īs mentioned, the emotion of “Panic” is there for good reason. Or in other words, one person’s panic leads to other people panicking and acting accordingly. people are likely to act upon emotions that are displayed by others. I came across a fascinating article a number of years ago by PNAS (The Proceedings of the National Academy of Sciences) in which they conducted an experiment on Facebook that highlighted that emotional states were not only transferred to others via emotional contagion, but they actually lead people to experience the same emotions without their awareness and were even likely to affect the type of articles that they subsequently posted. Particularly if all those around you are panicking. One shouldn’t under-estimate one’s own propensity to panic. But SVB had positioned itself at the center of a massive Global Social ecosystem, and when one depositor began to panic, it wasn’t long before panic was spreading like wildfire across multiple social platforms, which culminated in largescale withdrawals with the swipe of a finger on one’s phone. As King Shlomo points out, we are no stranger to Bank runs, and they have been happening for hundreds of years. It might be for this very reason that the SVB episode was so particularly rapid and extreme. When everyone around you is panicking and losing their heads, it becomes consummately harder not to join the fray. One's ability in controlling your own reactions to other people's behavior is way harder. The ability to keep one's own emotion under check, one's own reactions under control amidst an event that engulfs your own personal life and shrouds just you and those immediately around you in uncertainty is hard enough. I fully understand how difficult it is NOT to panic. (Panic is an appropriate response when the fight or flight response is triggered in a one on one meeting with a saber-toothed tiger for example. Panic on the other hand, will almost never result in a positive outcome when it comes to investing. You will still get wet, but should avoid drowning. Being fearful, in moderation, is a very helpful emotion when it comes to investing, as one is able to manage a portfolio whilst adhering to risk management principles, that should allow one’s portfolio to weather any storm appropriately. Although I do not believe that King Shlomo was inherently predicting a banking crises, yet in the short few weeks since the collapse of the bank transpired we have seemingly all become some expert analysts on the banking sector! Quite amazingly, despite hundreds of years of banking experience, with all the improvements in technology and the enhancements in security, the entire banking sector which is central to a functioning Global ecosystem, is ultimately held together by basic human trust.Īlthough some excellent content and analysis has been written already, I firmly believe that although they always appear under different guises, periods of systemic market drawdowns and volatility, always portray themselves via human emotions of fear and panic. There are many famous lines in the book of Kohelet (Ecclesiastes), one of the writings of the Bible, thought to be written by King Shlomo, the wisest of all men, but in the aftermath of the SVB (Silicon Valley Bank) debacle, one in particular that stands out to me is that there is nothing new under the Sun.
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