The V Word...how do we cope?

The people of Japan have felt the earth shift under their feet in so many ways over the last few weeks. A devastating record-breaking earthquake shifted their entire land mass a few metres and the resultant powerful tsunami, graphically captured on video, washed away any object in its path. Explosions at a nuclear power plant and fears of radiation seeping invisibly across their country, and possibly abroad, sparked fears of a nuclear catastrophe that was barely imagined possible.

When events such as these occur they turn people’s worlds and expectations upside down. Aside from the massive human toll, which reverberates as grief throughout communities for very long periods, the sense of safety and certainty that they may have enjoyed is ruthlessly stripped from their psyche.

As the ripple effect from this mammoth tragedy unfurls across the globe, mainly through financial markets, we too must again grip tight and hold on for the ride. The V word is back – volatility.

By its very nature, stock markets move up and down. Sometimes these movements are dramatic, not unlike the quake, which along with political unrest in Libya, has fed into this latest round of share market jitters.

How quickly we are lulled into a false sense of security and sameness. Over the last 6 months or so, we have had a period of relative market stability and rising, albeit moderately, stock prices. In a few short weeks we are thrust back into an unknown world with uncertain outcomes.

Investing in the stock market means coming to terms with these ups and downs just like we come to terms with the highs and lows in our lives. Being slightly more risk averse than men, we can take time to be at ease with the value of our superannuation and portfolios jumping up and down over the year. Through educating ourselves on the nature of shares and markets, by having an asset allocation appropriate to our risk appetite and ensuring we understand our investing horizon with respect to our pools of savings we can reduce this fear.

There are many things in this life we cannot control. The people of Queensland, Christchurch and now, Japan have all had stark reminders of this in recent times. We do, however, have control over ourselves. The ability to calm and soothe ourselves in difficult times when the future seems precarious and to aim for balance when the rug is pulled from under our feet is the mark of someone prepared to face their fears.

As Mark Twain said so eloquently – “Courage is resistance to fear, mastery of fear – not absence of fear”.