The Power of Positive Investment Thinking
During volatile times in the markets, everyone needs words of wisdom and comfort to fall back on. In Norman Vincent Peale's book, The Power of Positive Thinking, Peale shows how to obtain a more positive and optimistic attitude through the use and repetition of positive affirmations, short phrases, prayers, and mantras. These are used to combat the negative thoughts that we bombard ourselves with, or that come from external sources.
Our thoughts are powerful. For example, have you ever said, "The market is going down?" Of course you have. But what have you actually said? You actually made a prediction about the unknown future. The market is not going down. The market did go down. If you say to yourself, "The market is going down", you are feeding into fear (and creating a desire to abandon your investment plan). However, instead, by thinking "The market has gone down recently, but that does not mean it will continue to go down forever" is more rational and can help you let go of the desire to "act" (usually by selling). The markets exist in a world filled with risk and no assumptions about future returns can be made as a result of recent returns. Our thoughts and words should reflect this reality.
Being mindful of our thoughts and words during volatile market times is especially important because it is certainly worrisome to watch portfolio values go down. Many investors ask themselves irrational questions such as, "Why didn't I get out; I knew this was going to happen" or "What if this keeps going down...to zero!". I too get restless and bothered watching market values drop. However, we must fight back with positive and truthful words, but we need these at our disposal. At these times, I like to pull out the various words of wisdom I have collected over the years and hope that you can find some comfort in these quotes and phrases as well. These words will not change your portfolio's value, or where the market goes, but they can change how you feel, and therefore how you act.
Read and reflect upon each one until you understand the point. You may even want to post one (that you find most comforting) where you can see it and read it frequently. Here they are:
Every past decline looks like an opportunity, while every current decline looks like a risk.
Risk has only one accurate definition: the chance the investor won't achieve his goal. This risk is increased thought the abandonment of a sound investment plan at the time of a bear market.
Volatility is not risk, and a temporary decline isn't permanent loss unless you sell.
Always remember: "This too shall pass."
Patience is necessary in order to wait for positive returns to eventually unfold.
Risk isn't investing in stocks and experiencing volatility; risk is NOT investing in stocks and experiencing a shortfall in savings when you retire.
Discipline is the ability to NOT act as you wait patiently through a painful market
"Corrections are like the crosstown bus; if you missed the last one, there wil be another one along in fifteen minutes. They're as common as dirt." - Nick Murray
If you can't ride out a fifteen percent decline virtually every year, and an average of twice that every five years, you are not going to be a successful investor.
There is only one asset class that fully captures human ingenuity, which is the most valuable asset on earth - stocks.
Your well constructed and considered financial plan did not call for a change to your portfolio when the fed raises interest rates, or stock prices drop.
A bear market is an episode during which common stocks are returned to their rightful owners.
When the outlook is the worst, future returns are likely to be the highest.
"Be fearful when others are greedy and greedy when others are fearful." --Warren Buffett
Risk and return are inextricably intertwined. If you want to obtain higher returns, you must face the prospect of higher losses - William Bernstein