Mind Over Markets: Rational Investing in an Emotional Market

When markets are distressed—whether due to economic downturns, geopolitical instability, or financial crises—it’s important to act with caution, strategy, and long-term perspective. We recommend staying confident in your financial plan and doing the following so you can benefit from remaining in the market:

Assess the Situation

  1. Understand the cause of the distress (e.g., inflation, interest rate hikes, war, recession fears).

  2. Is it systemic or sector-specific? Some downturns hit particular sectors harder.

review your portfolio

  1. Diversify: Make sure your portfolio isn’t overexposed to a single sector or asset class.

  2. Rebalance: Consider shifting to more defensive positions (e.g., healthcare, utilities, consumer staples)

  3. Preserve capital: Reduce speculative positions if you are risk averse.

maintain liquidity

  1. Keep a cash cushion to handle emergencies or to take advantage of opportunities.

  2. Consider short-term safe assets like money market funds or Treasure bills for stability.

avoid emotional decisions

  1. Don’t panic sell - often the worst moves are made in fear.

  2. Stick to your financial plan unless fundamentals have truly changed.

Look for value opportunities

  1. Distressed markets can present buying opportunities if you have a long-term horizon.

  2. Look for quality companies trading below intrinsic value (i.e., strong balance sheets, good cash flow).

Long-term Strategy still matters

  1. If your plan is sound, sometimes the best action is doing nothing.

  2. Understanding market psychology is just as important as the numbers.

If you don’t have a financial plan or would like to meet with a wealth advisor to discuss your portfolio, please contact us at 717.888.9830 or at invest@riverwealthadvisors.com.