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Investments Keeping You Up at Night? Managing Stress During Market Volatility

The events of the last six months have been unlike anything experienced in a generation. It's hard to believe that we started the year with serious risk of nuclear conflict with Iran, and that most likely won't even be in the top five stories of 2020. Since then, we've gone through a global shutdown of a magnitude never before seen, followed closely by social unrest at a level we haven't experienced since the late 1960s. And we're still months away from the most influential Presidential election of our lifetime, one guaranteed to cause otherwise normal people to stop thinking coherently and take to social media to wow us with their political and intellectual acumen. Like bumper stickers for the digital world, affecting all those forced to endure them in the exact OPPOSITE way than the author intended. Oh well, at least Zuckerberg will appreciate (and monetize) the ramblings. Which of course, just happens to be actual revenue model of Facebook.

But I digress...

For millions of Americans- especially the unprepared- this period of massive chaos has resulted in significant financial distress and untold worry, and I know very few who have not experienced at least some degree of anxiety. This financial burden seems to be weighing more than a little bit on the inflamed mass psychosis currently gripping our country. Throughout it all, investors have been far from shielded from the unfolding drama- market volatility is the highest it’s been since Black Monday, over 30 years ago - and this is the largest volatility spike linked to a disease outbreak in history. Few of us- even the so-called financial experts - profess to understand what's actually going on in the economy and markets.

I personally observe that when humans feel like they are not in control (be it elections, market shocks or social unrest), they are prone to devolve into thoughts, feelings and emotions that are both unusual and unpredictable. Usually ineffective. And frequently regretful. In a bipolar culture; is it any surprise that our politics, markets and even social discourse mimic this pathology?

Living through COVID-19 is stressful enough. Feeling hopeless about an unpredictable stock market certainly isn’t any help. If you’re one of many worrying about their investments, a.) you are not alone and b.) there are some reliable actions that you can take to reduce stress and make a plan moving forward.

Prioritizing Your Mental Health 

Psychological professionals have long acknowledged the detrimental effects of stress. It's corrosive makeup impacts every aspect of your life including sleep, cognition and overall physical health.2 In times of financial as well as social uncertainty, it’s important to first regulate your mental well-being; high stress levels actually change human perception, increasing the likelihood of impulsive decision-making.3 It's literally like walking around in a fun house or wearing the wrong prescription eye wear. As a result, it’s wise to consider certain stress-managing lifestyle changes before making any big investment-related decisions. 

Reducing Stress Without Changing Your Finances 

Stress makes us feel as if we’re losing control. Maybe you know what I'm talking about. This is why it’s vital to focus exclusively on the things that you can control in your lifestyle (independent of finances) wherever you can. Because it's all connected as well as cumulative. The following suggestions have been proven to have positive effects:4 

  • Focus on wellness. They’re timeworn suggestions, but the "Big Four" really work: exercise regularly, get enough sleep, eat well and practice mindfulness. A big duh, I know. But how would you honestly grade yourself on exercising the recommended 60 minutes each day, sleeping at least 8 hours, weighing in at or below your ideal BMI or dedicating time every day to peaceful and quite reflection? (And no, sleeping at the office does not count, because I checked.) Allocate time to engage in recreational activities that make you happy, or explore a new hobby. We all know it, but few of us do it well. For instance, I've taken up crochet, which not only provides a relaxing distraction but has also inspired my friends to socially distance from me, so win-win.
  • Don’t use unhealthy coping mechanisms. These can be harder to recognize than one might expect. Avoiding smoking and drinking in excess to cope with stress seem pretty obvious. But many of us have less damaging, but hardly effective, tendencies to overwork ourselves or unnecessary risk-taking. For instance, sometimes I go to H-E-B (on the weekends!!), knowing it's liable to be a ginormous disaster, one in which I may or may not purposely ram someone with my cart, someone who may or may not deserve it, because who gave them the right to take up the entire aisle anyways? My therapist is constantly reminding me that's not my judgment to make. I'm supposed to ignore the voices in my head and simply let the person block the aisle for ten minutes to ensure they select the absolute best coffee brand for them. As they did last week. It's fine. I'm over it.
  • Stay socially connected. Social support increases resilience to stress.5 Humans are not designed to be isolated, a point especially pertinent in this age of 'soclal media' where the most active users of Facebook and Instagram are well-known to be the most dysfunctional and clinically depressed. Experiencing the combined effects of financial stress and social distancing measures from coronavirus appears to make people susceptible to feelings of isolation. Now more than ever, we should be making overly-proactive efforts to connect with our support system and social networks to avoid feeling consumed by anxious thoughts. That does not mean showing up to my house unannounced, but maybe send a text when you're turning down my street?

Approaching the Volatile Market 

If the markets are causing an obvious and excess amount of pressure on your waking (and sleeping) hours, the aforementioned actions can help you handle stress, but it’s impossible to solve the problem without addressing the core stressor: the worry you have about your investments. Those fairly significant things you have been building, cultivating and protecting for the past few decades, sacrificing instant gratification and quick fixes in the past so that you're not forced into a future of eating puppy chow.

One of the common complaints voiced by my clients in down markets is how they could have done so many other more enjoyable things with that money, and how much regret they have putting it into something that can seemingly disappear in a flash. I get it. Seeing a portfolio diminish in value suddenly is truly gut-wrenching for all but the most hearty, faithful or (arguably) insane! Especially following a decade where our leaders in Washington have conditioned us to expect that nothing should ever go wrong, hurt us or our feelings, or cause us any pain.

The campaign to protect us from distress has been purposeful and successful, and protecting our feelings has in some ways made us less resilient, both in our normal lives and with our finances. I'm old enough to remember when markets were allowed to go down, and stay down until the cause of the drop was removed and improved. Now, it seems our leaders just wallpaper over it and act like it never happened.  As a result, it seems we've forgotten that markets have periods of flat or even under-performance. It happens..

The first step is to accept what’s happening economically. The optimistic bull run of the past 11 years took a swift downturn, and we’re now in a period of unpredictability, uncertainty and inconsistency.6 This used to happen all the time, we've forgotten that. That doesn’t mean investors have to live in a constant state of stock-induced anxiety, although it can be difficult not to. To improve your mentality when approaching the stock market, keep these guidelines in mind. 

Smash your TV

I'm serious. We all know the media on either side on any issue is usually trying to manipulate us. If you didn't know that before, allow me to introduce you to 2020. They will happily feed us the fast-food version of the truth, and we return each day or night to slurp it down again. We recognize that news should be consumed like other highly-processed food- in extreme moderation. Look back on the news in January, February, March... you get the idea. Did knowing what was going on cause you to do anything productive (besides hoard toilet paper)? Or do you look back now and realize that you had absolutely no control over what you were seeing, or what could be done in response? Do you think now that you probably could have invested that time in something else more productive to yourself or society? Or was that news so critical, beneficial and actionable that you went out and made positive change for your life and future?

I suspect not. If you're like me, you look at the news you consumed weeks, months and years ago as somewhere between worthless and useless. It's likely you would be no worse off if you had you ignored it in it's entirety, and probably much better off- at least from a mental health perspective.

Have you already realized that the recent social unrest we've all endured in the last few weeks- witnessing assaults on police, civilians and even military...  destruction, 24-7 complaining/whining/excuses/scapegoating and other behavior that would have been unimaginable ten years ago- is toxic for your mind and soul?

Here's a little secret: modern journalism is the fast-food of modern life. For one, it's very often created by people with inadequate education that are dramatically underpaid. As in the rest of life, you tend to get what you pay for. In addition, it has very little redeeming value, and you are probably not important enough to provide you with any information so useful or unique that you could actually act upon it. Financial news may be the most detrimental genre of all, which is why it's ratings have been dropping like a rock for two decades. Sometimes it seems engineered purely to obfuscate, frustrate, and sabotage. If you've worked with me for more than a month, then you know the best way to win in the market is almost always to do nothing. Unfortunately, much of the financial press needs you to believe you need to do something... anything... So the programming is developed around bringing you back on "the other side of the commercial break." Like regular news, it's not there to inform, it's there to sell and influence. As I always say, doing the opposite of what everyone else is doing in modern America- the 180 degree opposite - will almost invariably lead you to success. And no, I'm not (only) talking about Tik-Tok. Although that's a good start.

Here's another revelation I will let you in on: when an investment bank or investing sage (with few exceptions) goes on television to promote an idea or strategy, there's a decent chance they are 'talking their book,' which is where they take a position (bull, bear, etc.) and then announce it publicly. If you don't understand what that means and why that's detrimental... then you should probably not be listening to financial news. Studies have shown that the market experts are almost completely wrong the vast majority of the time. If you need proof, give me a call. I have lots of evidence. Your best "strategy" is almost always to do the opposite of their advice and then review in a year.

* I don't actually advocate smashing your TV. Just donate it to someone who has less important things to do in their life than you. You weren't put on this earth to consume television, of that I am sure. The less you consume, the better your life will invariably be. And the less regret you will have at the end of it.

Avoid Online Advice

Unless I wrote it. Just kidding.

If you consume much content on YouTube, you are likely to see many ads from investing gurus. You know the ones I'm referring to. Like the guy in his mid-thirties on his jet. Wearing a rock concert t-shirt. Promoting options. I always expect the cast of SNL to pop out. But they never do. It's always a buzzkill for me, because it would be so funny if it wasn't real.

You would think in times of massive volatility these guys would disappear but it sometimes seems as if they proliferate in these environments. You've also likely received an investing newsletter solicitation in your email (or snail mail) once or twice in your life. And I would wager, at some point in the past, someone has recommended (without you asking) a newsletter, website or other financial resource that promises big gains.

Run. Run far, far away. Even it's virtual running.

The Internet is no less dangerous than the television in dispensing dubious investment advice that is often counter-productive and sometimes catastrophic. If it requires an email address or- heaven forbid- a paid subscription... well, you know how that sentence ends, don't you? 

If these people were so successful, they would not be sharing that strategy, technique, class, guide or any other commercial product with you. There is virtually no scenario where it would be more profitable to give away their knowledge than to trade it by themselves. Yet, how many people do I know that have gone to a real estate seminar on flipping homes or a stock market seminar on day-trading? All I can figure is that when investors experience financial stress, our brains fall out and our wallets open up automatically. I suspect the public school system probably isn't helping things, either. Emotions start to override reason, and we grasp for anyone who - implicitly or explicitly- offers us the opportunity to recover some of that control we feel we've lost. Sheep for the slaughter...

The point is that TV and internet are generally not fertile ground for financial well-being. Do you know a lot of people you admire who credit their financial success to consuming a lot of television? I know none. If you want to be rich, do what rich people do. If you want to be poor, do what poor people do... If you are going to swim in those ponds, be extremely discriminating, patient and skeptical. Run any ideas by your spouse (SHE usually has better intuition than you!) or someone objective who has no dog in the fight. As usual, they can usually offer a perspective that differs from yours, and how many times do we wish we had expanded (and contrary) perspective during past mistakes? Sometimes I question whether I should even leave the house each day without running it by my mother.

Take a Break 

Over-checking your portfolio is ill-advised in general and even more so during market downturns. For most, investing is a long-term proposition. Constantly checking your investments is not only unnecessary but often a source of aggravated stress - the same goes for over-consuming news about the stock market. This can increase the chance of making hasty, emotionally-driven decisions. It may be in your best interest to momentarily step away from your investments in order to gain perspective.

What I have witnessed in the past three months is a culture stuck in lock down, more obsessed with their investments than ever before, updated by the second on their 'smart' phones apps. Never had we had such immediate and easy exposure to our investment accounts. Do you think that could have contributed to the fastest market drop and fastest recovery in modern history?? If you have found yourself checking your accounts more than once in the same day, I would encourage you to get a life. I don't mean than in a derogatory way, I'm being literal. Like, is what happens at 1:30 PM on a Tuesday afternoon going to cause you to change your strategy? How often do you check the weather? Or the price of tea in China? It's the same thing. Put yourself on a portfolio diet.

Set a goal- say once a week or even once a month- to review your investments. Consider doing it in a happy place or with your trusted financial counsel or partner. Experiment with whether less exposure produces more or less peace of mind or smart decision-making. And then, as usual, try to find a replacement activity or resource to fill the time you previous spent staring at your investments. I count the holes in the ceiling tiles, and consider it time better spent than the market. Your results may vary. 

Assess Your Investing Goals 

While you should avoid over-checking it, seasons of volatility are a great time to reassess your portfolio and remind yourself of your long-term goals. Why is your portfolio made up of these specific investments? Why are you investing in the first place? Do you think the companies you currently own will still be viable in five years? Ten years? The rest of your life? Are you a business owner or a speculator? An investor or a gambler? Do you need this money in the next 12 months? Or even in the next 12 years?

Despite a dynamic stock market, it’s my perception that most investors’ long-term goals remain unchanged. Keeping yourself conscious of these long-term returns is crucial; remember that your investment plans will outlast a period of market volatility. The majority of the media, many of our leaders and some of our companies will try to get you to focus on the short-term, because that is often a very lucrative strategy. For them, not you.   

Making Investment Decisions 

If you have an advisor, talk to them about your concerns. If you don’t have an advisor and think it’s time to work with one, now’s an opportune time. If you think advisors are universally goobers who probably eat glue and no one likes, find someone neutral who knows about investments, owns some and appears to have had some success. Take them to lunch, it might be the best money you've spent this month. Their guidance will likely sound much different than the talking heads on the financial cable channel. You're likely on the right track if they don't talk as loud or as fast, or try to get you to buy something at the end. If there is inspiring music in the background, that also could be a red flag to keep your guard up. If they are on a private jet with a Guns & Roses t-shirt on... well, let's be honest, you get on the jet. I don't have a jet. I drive a Toyota Tacoma with 130K miles.

No matter your circumstances, my fundamental piece of advice is to avoid making an uninformed decision. Patiently observing your losses isn’t easy - but note that as bear markets average losses of 33 percent, bull markets are much longer in duration and come with average gains of 159 percent.7

What part of this chart is confusing?

Remember that, historically, the stock market has recovered.8 Bear markets are a normal part of investing. Winter came this past year, and no one freaked out because we know it's part of a cycle. It can't always be summer (thank God!) Markets can't always go up all the time and trees don't grow to the sky. Everything in life is cyclical. And I can almost guarantee that you and I are not smart enough to know the direction of the stock market (in the short term!) To successfully time the markets, you must to be correct twice- when it goes down and also when it goes back up. Find me someone that can do that consistently, and I will buy you both that lunch.  

Right now, in this age of chaos, it’s hard to see an upside as anxiety is spreading like wildfire through the investment landscape. Two months ago the planet was unraveling, a month ago the market was rising almost every day. This month we have a social-economic environment seemingly spinning out of control. And it's not even July yet. It’s understandably stressful when you feel the security of your investments is threatened - but don’t allow a volatile market to cause you too much distress. Long-term returns will outweigh the short-term losses. Quick, emotional decisions with money often resemble those in the rest of your life- bad. Until then, focus on your mental well-being and solidify your financial plans. Go against the herd.

I'm gonna go out on a limb and give the illusive "Bart stock tip"... this year is gonna be volatile. It's gonna go up, it's gonna go down. You have no influence on it at all. You won't know when it peaks or troughs. In the end it will surprise and humble you. Your biggest fears will remain unfounded. Wall Street will profit from the emotion of others. CNBC will still struggle to fill 24 hours a day of programming content (I would use other words) predicting the market. Journalists will argue that Warren Buffett has been left behind. You'll discover you were likely better off doing nothing between now and then (except investing more.) And you probably won't need to tap your accounts to pay the bills.  

I know... brilliant and revolutionary. All that insight literally just came to me. 

Call me to schedule an appointment and I will tell you more of my top secrets. 

  1. https://insight.kellogg.northwestern.edu/article/what-explains-the-unprecedented-stock-market-reaction-to-covid-19
  3. https://www.stress.org/stress-effects
  5. https://www.ncbi.nlm.nih.gov/pmc/articles/PMC5201132/
  7. https://www.apa.org/topics/manage-stress
  9. https://www.ncbi.nlm.nih.gov/pmc/articles/PMC2921311/
  11. https://crsreports.congress.gov/product/pdf/IN/IN11309
  13. https://www.invesco.com/us-rest/contentdetail?contentId=049233173f5c3510VgnVCM100000c2f1bf0aRCRD&audienceType=investors
  15. https://www.statista.com/chart/21144/s-p-500-recession-recovery/

This content is developed from sources believed to be providing accurate information, and provided by Twenty Over Ten. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security.