Behavioural Finance: A Plan for Anything

COVID-19 is significantly impacting our daily lives. There are serious global health concerns; 'Social Distancing' was unheard of until recent weeks; and for those invested in the stock market, there have been significant levels of volatility.

In previous articles, I've discussed the theory of Behavioural Finance and the impact human psychology can have on economic decisions. COVID-19 is certainly putting the psychology of human behaviour to the test.

COVID-19 is significantly impacting our daily lives. There are serious global health concerns; 'Social Distancing' was unheard of until recent weeks; and for those invested in the stock market, there have been significant levels of volatility.

In my November 2019 article 'Behavourial Finance: Navigating the Risks of Emotional Investing', I included the following chart:

At this time, we were likely nearing the peak of the optimism phase; there was talk of recession brewing and global trade uncertainty persisted, factors which increased market volatility.  At that point, COVID-19 hadn't yet reared its head.  All this to say, global pandemic aside, economic uncertainties existed in the market.

In recent weeks, we've experienced unprecedented volatility in the stock market.  The historically quick sell-off indicates that investors very quickly moved to the 'fear – panic' stage of the Cycle of Investor Emotions. News headlines, health concerns and dismal economic forecasts are a few factors that have aided in inducing fear and panic.

With these recent developments, its appropriate to revisit 3 relevant investor blind spots, discussed in my earlier article 'Behavioural Finance: Exploring Wealth Personalities':

  • Sensitivity to noise
  • Loss aversion
  • Short term focus

It's human nature to react emotionally and for investing blind spots to appear; if you currently have a bad case of the ‘what ifs’ in relation to your financial future, that is understandable. But it may also be counterproductive. Making a rash decision in the emotion of seeing a portion of your recent gains disappear may lead you to a course of action you could come to regreti.

Let's review some of the facts to help clear/reduce these blind spots:

  • From 1962 until this year, Canada has survived four recessions (officially judged as two consecutive quarters of negative economic growth) and every single time the economy has come back with strong growthii
  • From 1985 to 2018 we’ve seen eight stock market downturns, including the crash of October 1987. From October 1987 - 2018, the S&P/TSX Composite Total Return Index returned about 250% (an annualized average of 8%)iii 
  • Staying invested by taking a long-term view to a quality, balanced investment portfolio has proven beneficial:


TD Asset Management, 2020. 

Periods of volatility and/or slowdown highlight the importance of planning for your financial future.

Your financial plan should be prepared 'for all seasons'. Periods of volatility will always exist, appropriately positioned for your time horizon.

  • Create a plan for all seasons

Your financial plan should be designed to help provide protection during periods of economic uncertainty and capitalized on periods of growth.

  • Plan for lifecycle stages

Your investment portfolio should align with your financial plan and goals.

If you're in or nearing retirement, have a portion of your portfolio in low-risk, accessible investments.  This allows you to fund your retirement without withdrawing funds while the market is down; ensuring you remain invested for the upswing.

  • Plan realistically and update your plan when necessary

Speak to your Advisor frequently. Ensure they are aware of any updates that could impact your financial future.  Your plan should be a living document that is frequently reviewed and updated as required.

  • Trust your plan

While we continue to navigate this period of uncertainty it is important to speak with your Advisor (who can provide an educated and objective view of the market), adhere to your financial plan and protect your health.

iYour Money in the Age of Uncertainty; Don Sutton, March 2020.
iiBrian DePratto, “Canadian ‘Solo’ Recession Risk: Rhetoric vs Reality,” TD Economics, Mar. 1, 2019, accessed Oct. 11, 2019,
iii“Market Ups and Downs,” Feeling Confident About Investing, TD Asset Management, 2018, accessed Oct. 11, 2019.

TD Wealth represents the products and services offered by TD Waterhouse Canada Inc., TD Waterhouse Private Investment Counsel Inc., TD Wealth Private Banking (offered by The Toronto-Dominion Bank) and TD Wealth Private Trust (offered by The Canada Trust Company).

About the Author

Julie Fitzpatrick, CPA, CA

Investment Advisor, TD Wealth Management
Julie Fitzpatrick is an Investment Advisor with TD Wealth Management in Saint John. She obtained her Chartered Accountant (CA) designation in 2012, placing on the David Hope Honour Roll, and holds a Bachelor's degree in Business from the University of New Brunswick Saint John, graduating with the Lieutenant-Governor's medal for distinction in scholarship. At TD Wealth, Julie works with clients to prepare personalized and comprehensive wealth and investment plans to help comfortably meet their goals.