Markets have never been this volatile and the next financial crisis is seemingly around the corner. We certainly live in interesting (read "frightening") times. It's not a matter of "if", but "when" the next crisis hits.
Here's how to mentally prepare for the inevitable...
Don't hold on to the hope that the economy will be fine and that there won't be any more shocks to our ultra complex and shaky system. There will. This is a dead certainty.
The first step in avoiding panic is to know for certain that it will happen. Life hurts (sometimes a lot) and good times never last. In fact, nothing does. Face this fact head on and you won't be surprised and panicked when you-know-what hits the fan.
Panic gets you nowhere. Only a calm mind can deal with a threatening situation. Internalise this lesson when things are running smoothly and this knowledge will help you when life throws you a curveball (as it invariably will).
When you feel yourself starting to panic, think about whether this is helping your cause. Don't fight the thoughts you're having; be aware of them and simply let them wash over you.
It takes exercise, but it's possible to train yourself to keep panic under control.
The Litany against Fear (from the novel "Dune" by Frank Herbert) is an incantation used to focus and calm the mind in times of peril. The litany is as follows:
I must not fear.
Fear is the mind-killer.
Fear is the little-death that brings total obliteration.
I will face my fear.
I will permit it to pass over me and through me.
And when it has gone past I will turn the inner eye to see its path.
Where the fear has gone there will be nothing.
Only I will remain.
Knowledge is power
Learn how the stock market works. Know, for example, that every single market crash in all of history was followed by a recovery. The Spanish Flu (which killed 50-million to 100-million people), two World Wars (including a nuclear holocaust), multiple depressions, recessions, oil shocks, Aids… I can go on forever. These things felt apocalyptic at the time, yet the market invariably recovered.
Learn about diversification (i.e. not keeping all your eggs in one basket) and how this can help you weather the coming market storm. What about other, more stable markets?
Subscribe to business newsletters, learn more every day. It'll be easier to prepare if you're armed with knowledge.
If my niece starts screaming because she needs a new nappy, I'll most certainly freak out as I simply wouldn't know what to do. My sister, on the other hand, has the all the knowledge and experience she needs and another dirty nappy is, for her, just about a non-event.
Article continues on page two: ignoring sensationalist headlines, keeping perspective, toughening up and the real crux of this matter...