Financial Library

Cooler heads will prevail

The newspaper headlines read: 'Roller coaster stock markets have investors feeling queasy' (The Globe and Mail; 'The stock market crash: History repeating itself?' (The Calgary Herald); 'Uncertainty continues to pummel stock markets' (Sudbury Star); 'The next market boom may be a lifetime away' (Financial Times). Interestingly enough, these headlines are from November 2002. One year later, the S&P/TSX Equity Index was up 20.8%; and two years later had soared by 40.7%.

Great Depression 2.0?

It's been a long and volatile quarter in the financial world. Markets are taking most investors on a wild and sometimes frightening ride, the news about corporate failures and bailouts is confusing and the economic news is almost certainly disheartening.

As some in the media eagerly seek to assign blame for the current stock market turmoil, others are predicting a global doom reminiscent of the 1930s.

Cycle of Market Emotions

Getting emotional about investments can easily lead to poor decisions as investors fall prey to negative thoughts and fears. The chart below helps to illustrate the emotional aspects of investing.

The human brain constantly searches for trends or patterns in things, trying to make sense out of even random events and data. This essential life skill is not very helpful when it comes to investing.

How To Care

Our parents raised us; we moved out, had children of our own and raised them. Then our children moved out and had children of their own to raise. It was supposed to stop there for us, but then one day we had to look after one or both of our parents.

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