How to cope with ongoing uncertainty

The world is currently such an uncertain place, with Covid-19 continuing to wreak havoc on our daily lives, as well as on economic growth and global markets, despite more than a year passing since the pandemic first erupted. As an investor, how do I cope with this continued uncertainty?

Name withheld

Anet Ahern, the chief executive of PSG Asset Management, responds:

Understanding that market conditions are temporary and subject to change, with the current news often quickly reflected in prices, may be the investor’s best protection against this constant uncertainty. It is this knowledge that can help us to tame both fear and greed (the twin enemies of investors everywhere), by forcing us to take a longer-term perspective to investing. This approach also helps to cement the importance of diversification as an investment strategy. Once the inbred variability in the market is understood, investors are much less likely to fixate on one single approach as a “silver bullet” to wealth creation, and far more likely to spread investments widely.

The combination of a defined process, structure and as much objectivity as is realistically possible are powerful in coping with uncertainty and preventing behavioural pitfalls in investing. Although it is important to acknowledge the emotions embedded in investing, it is even more important to apply structure and objectivity as a safeguard against knee-jerk actions, which can damage a long-term investment plan in profound ways.

Markets are variable, and investors should plan accordingly. Start with a proper assessment of what you need and what risk you can tolerate. Implement with the emphasis on building a weather-proof

diversified portfolio and not overpaying for investments.

Once this is in place, adjustments can be considered and one can respond thoughtfully, not an emotionally, to the current turmoil.