Legendary trader Ed Seykota said, “Everybody gets what they want out of the market.” Want fame? Wealth? Riches? How about a habit to focus on daily? A constantly evolving intellectual challenge? What about the justification for a system that’s rigged against you? Take your pick.
Whenever we have a variable that produces volatile results, people will struggle with finding context. The market becomes either reflective of or a magnification of some feeling or emotion we’re experiencing.
Here’s an example: Retirement for most people is wrapped in uncertainty. We go to work every day for years and then we retire once. On a Friday they throw us a little party and on a Monday we just don’t go there anymore. It’s a big deal, in the same way, buying a house or getting married is – there’s life before and after the event.
Since many American’s retirement savings are exposed to market fluctuations, the value of the account can offer a warm-blanket of “look how much I’ve saved – I could retire today,” just as easily as, “look how much I just lost! I thought I was ok, but now I don’t know if I can ever stop working.” The market is the variable, retirement is the object. How we really feel about retiring is going to shape how we frame market fluctuations.
The Financial Planner’s job is to create a plan that gives clear context to life’s unfolding events. Without a plan, emotions can take over. Uncertainties and fear will reflect and magnify themselves without us even realizing it. With a plan, we can recognize the emotions as emotions (the losses still hurt!), because we’ll at least know how to frame them. This is Seykota’s point – if we want to have a plan that keeps us from emotionally panicking, we can get that. It won’t remove the variability from the world, but it will remove the variability from not knowing how to process whatever the Dow just did.
Our job and our value comes in providing appropriate context to help people get what they want. It takes a lot of listening, a lot of contact, and a little psychology – but a dedicated professional can learn to do it really well. It may not feel like it’s making a big difference on any one day, but like retirement, buying a house, or getting married, there’s the time before a person has a plan, and the time after. Our work can make a difference.