Investment planning can be riddled with unanswered questions, unknowable returns and a general uneasiness around the decisions you make, all of which have a big impact on your state of mind. In one study, more than a third of Americans admitted that “recent [stock market] volatility is making them anxious about their nest egg.” And a study from 2014 that analyzed 30 years of California hospital admission records found a nearly immediate bump in hospitalizations following stock market drops, particularly of people experiencing anxiety, depression or other emotional stress.
“There’s a huge emotional component to taking responsibility for making your own investments,” said Maggie Baker, Ph.D., a psychologist and financial therapist in the Philadelphia area. “And you’re dealing with the markets, where there are so many variables that you have no control over, so it creates uncertainty.”
While it’s easy to let investing stress you out, being involved in the stock market is one of the keys to building wealth. Here are some pointers for keeping your anxiety at bay:
How to manage the market as an anxious investor
Work with a professional. You could also consider joining an investment club. “Some people pride themselves on being able to do it alone, and I think they’re the ones who are at the greater risk of both anxiety and making mistakes, because they don’t have anybody to bounce their ideas off of,” Baker said, adding that working with a broker, financial advisor or club opens you up to crucial feedback about your decisions. Deciding whether or not to hire a financial advisor will take a bit of upfront work, but the peace of mind you’ll get from having someone else help with your investment decisions may well be worth it.
Diversify your portfolio. Diversification — holding a variety of investments instead of concentrating your money in one industry or type of equity — is one of the keys to investor success, since it insulates you against big market dips. When one part of the market dives, another part tends to go up, and you land somewhere in the middle. Diversification can give you peace of mind when the market has wild swings. “That’s a good protection against volatility,” Baker said.
Make a plan for your holdings. Making spontaneous decisions about your investments is a great way to invite stress into your life. Instead, create clear boundaries (i.e. sell when the stock price drops to $30) so you know exactly when to make a move. “Thinking about those things ahead of time is a much healthier way to [navigate the market] than to be swayed by the impulse and the feelings of the moment,” said Amanda Clayman, LCSW, a financial therapist in Los Angeles.
Understand that your feelings are fleeting. In other words, don’t get panicked by your panic. And maybe take a deep breath. “Feelings can be very intense, particularly when your own money is at risk,” Baker said. “You have to learn that feelings come and go.” Baker suggested that a calming response that works best for you, like meditative breath work, for example, can help you counteract your anxiety.
View market swings as opportunities. If you’re investing regularly — via a 401(k) contribution, for instance, or via regular timed deposits — a market dip is a great thing for you. “A market tank is like a sale,” said Eric Dammann, Ph.D., a financial therapist and clinical psychologist in New York City. “It means that things are cheap, [so] you’re going to get stuff at a bargain basement price.” So, instead of thinking “My stocks went down,” try flipping the script to “This means stocks are on sale now” — as Dammann suggested, that little cognitive trick can help you feel less anxious about your own investments.
Habits to avoid
Don’t look at your portfolio every day. It’s the stock market, so there are going to be fluctuations — that’s normal and expected. But watching your investments lose and gain can mess with your head. Noted Dammann: “Unless you’re a day trader, why are you looking at stocks every day? It’s useless.” Plan to check in with your portfolio quarterly and put a reminder in your calendar. Unless you’re scheduled to take a peek at your portfolio, just leave it alone.
Don’t act on your feelings right away. If you’re a compulsive portfolio checker, you may also be quick to make decisions based on what you find. Be mindful of taking a long pause before you do anything with your investments, because when the stock market tumbles, it triggers your “reptilian brain,” Dammann said. “It literally triggers the panic center. This is the wrong time to sell. If you pause long enough, you’ll bring your more intelligent side in.” In concrete terms, that means you should sleep on any investment decisions, or call a neutral friend or your financial planner before doing anything.
Don’t watch the news during market dives. Today it’s possible to watch bad news 24/7. But if you’re invested for the long term — and that’s the idea, right? — today’s market swing isn’t a big deal and watching a steady stream of commentary on it can crank up your blood pressure. “When there is a 500-point drop in the market, everybody goes bananas because you’re getting bombarded with information that the sky is falling,” Dammann said. “That’s going to trigger the fight or flight reaction.” If you have an investing plan in place, stick with the plan — and turn off the news.
The bottom line
Although you can’t eliminate all of the anxiety from investing, you can take steps to make it less of a presence in your life. Stepping away from daily portfolio checks and a steady stream of investment news can help. It can also ease your mind to know you have a plan for your portfolio, that you’re diversified, and that market dips don’t have to spell disaster. The more structure you can put in place for yourself — giving yourself space to calm your anxiety and time before you make decisions — the more in control you’ll feel.
This article originally appeared on StudentLoanHero.com and was syndicated by MediaFeed.org.
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