Taking Emotion Out of Investing

"The most important thing for clients to focus on during these times is their plan," says Lawrence Sprung, CFP of Mitlin Financial. As advisors, we need to keep clients focused on their ability to reach their goals, and this will significantly reduce their anxiety regarding market volatility, which is something we always need to expect."

As we saw during the financial crisis in 2008, many investors panicked and sold out at or near the bottom of the market. They not only realized losses on their investments, but then missed out on some or all of the market's gains that followed in the ensuing bull market for stocks. Sadly, many of these investors saw their plans for retirement and other life goals seriously impaired.

Communicating Is Key

Sharif Muhammad, CPA, CFP, of Unlimited Financial Services, stresses the need for regular communications to clients.

"I have a blog, and I send regular communications to our clients," Muhammad says. "In these communications, I speak about market crashes, the history surrounding them and the aftermath of such events." He disagrees with the approach of some financial advisors who only communicate with clients during periods of market disruption.

Regular communication with clients during good and bad times lets them know you are thinking of them and that you are there to prepare them to deal with inevitable market disruptions. No client likes to see their investments decline in value. For some, especially those close to or in retirement, this decline can trigger emotions, like fear. Yet, by communicating and emphasizing the planning you and your client have done, it can give assurance that these types of declines are normal and that there is no need to divert from their original investment strategy.