Steve Wendel, Morningstar’s head of behavioral science, explained his view of current events.
“Personally, as a contrarian investor, I try to identify buying opportunities when there’s a down market," he said. "By buying when others aren’t, we help limit the carnage. People lock in their losses by pulling out at the bottom of a down market. It’s not the stock market decline itself that hurts them; it’s that they exit and then miss out on the subsequent market upswing.”
One tactic advisors can use, he said, is to “give vivid, real examples about the people who stuck to their long-term plans through one of these scares and ultimately thrived. The abstract is useless. It’s about how well you can help a client visualize the person who had the right approach to handling market volatility” that works.