Skip to Content
Risk & Behavior

A Behavioral Guide to Market Volatility

How behavioral science can help advisors guide clients through investing in volatile markets.

Investors are facing numerous obstacles right now—market volatility, health concerns, ruined routines due to stay-at-home orders, to name a few—all of which may make it more difficult to make thoughtful, long-term financial decisions. Luckily, advisors are in the unique position to intervene in investors’ decision-making process and provide techniques to help them avoid falling prey to behavioral biases.

In an earlier post, we outlined a conversation checklist to help advisors navigate tough conversations with clients investing in volatile markets. To accompany that piece, we’ve developed a behavioral guide that further explores pertinent behavioral principles and interventions you can incorporate in your practice today.

A Peek at our Guidance on Investing in Volatile Markets

The first step to effectively using behavioral science to make better decisions is to understand the core principles behind this line of research. Our guide provides a high-level overview of how our minds work, where biases are born, and a few particularly pernicious biases that tend to surface when we’re investing in volatile markets.

Once you understand what these biases are, you may begin to notice when your clients exhibit these behaviors, and therefore be better positioned to combat them. We break down the investing decision-making process into five steps:

  1. Investments: Selecting and Setting Expectations
  2. Information: How Much Is too Much?
  3. Emotion: Understanding our Biases
  4. Decision: Intervening at the Right Moment
  5. Action: Setting up Barriers

There are certain biases that investors are prone to—from the moment your client looks at their investments to the moment that they call you wanting to act—and there are tools you can use to help them manage these biases.

At each of these five steps, we describe interventions you can implement based on your client’s current state of mind. If your client is relatively calm and looking to you for guidance, now is the time to prepare for any future investor panic. However, if your client is already feeling anxious about the current market volatility, the guide explains various techniques you can implement throughout the investing process to help your client stay the course.

Helping Investors Work Around Their Biases

The external stressors that investors are currently facing may make them especially vulnerable to these biases, but there are plenty of opportunities for advisors to intervene.

In our guide, we explain why even the most experienced investors may be struggling to manage their emotions right now, and what you can do to help them make more thoughtful decisions.

For the full analysis, download “A Behavioral Guide to Market Volatility: How Behavioral Science Can Help Advisors During Market Turmoil.”
Get My Copy

Transparency is how we protect the integrity of our work and keep empowering investors to achieve their goals and dreams. And we have unwavering standards for how we keep that integrity intact, from our research and data to our policies on content and your personal data.

We’d like to share more about how we work and what drives our day-to-day business.

We sell different types of products and services to both investment professionals and individual investors. These products and services are usually sold through license agreements or subscriptions. Our investment management business generates asset-based fees, which are calculated as a percentage of assets under management. We also sell both admissions and sponsorship packages for our investment conferences and advertising on our websites and newsletters.

How we use your information depends on the product and service that you use and your relationship with us. We may use it to:

  • Verify your identity, personalize the content you receive, or create and administer your account.
  • Provide specific products and services to you, such as portfolio management or data aggregation.
  • Develop and improve features of our offerings.
  • Gear advertisements and other marketing efforts towards your interests.

To learn more about how we handle and protect your data, visit our privacy center.

Maintaining independence and editorial freedom is essential to our mission of empowering investor success. We provide a platform for our authors to report on investments fairly, accurately, and from the investor’s point of view. We also respect individual opinions––they represent the unvarnished thinking of our people and exacting analysis of our research processes. Our authors can publish views that we may or may not agree with, but they show their work, distinguish facts from opinions, and make sure their analysis is clear and in no way misleading or deceptive.

To further protect the integrity of our editorial content, we keep a strict separation between our sales teams and authors to remove any pressure or influence on our analyses and research.

Read our editorial policy to learn more about our process.