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

For millions, the pandemic has served as a source of financial distress and worry. This rings true, in particular, for investors of all kinds. Market volatility is the highest it’s been since Black Monday, over 30 years ago - not to mention the fact that this is the largest volatility spike linked to a disease outbreak in history.¹

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, these are some dependable ways to reduce stress and make a plan moving forward.

Prioritizing Your Mental Health

Psychological professionals have long acknowledged the detrimental effects of stress. It impacts sleep, cognition and overall physical health.² In times of financial as well as social uncertainty, it’s important to first regulate your mental wellbeing; high stress levels actually change human perception, increasing the likelihood of impulsive decision-making.³ Due to this, 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. This is why it’s vital to take control of your lifestyle, independent of finances, wherever you can. The following suggestions have been proven to have positive effects:⁴

Focus on wellness. They’re timeworn suggestions, but they work: exercise regularly, get enough sleep, eat well and practice mindfulness. Allocate time to engage in recreational activities that make you happy, or explore a new hobby.
Don’t use unhealthy coping mechanisms. These can be harder to recognize than one might expect. Don’t smoke or drink in excess to cope with stress, but also be wary of overworking yourself or unnecessary risk-taking.
Stay socially connected while distancing. Social support increases resilience to stress.⁵ Experiencing the combined effects of financial stress and social distancing measures from coronavirus makes people susceptible to feelings of isolation. Lean into your support system and connect with others to avoid feeling consumed by anxious thoughts.

Approaching the Volatile Market

While all of the aforementioned actions can help you handle stress, it’s impossible to truly do so without addressing the stressor: the worry you have about your investments.

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 volatility.⁶ That doesn’t mean investors have to live in a constant state of stock-induced anxiety, although it can be difficult not to. When you approach the stock market, keep these guidelines in mind.

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 the computer and television in order to gain perspective.

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?

How is your rainy-day fund doing? Right now, you may be realizing how helpful it’s been to have one, and/or how unnerving it is to not have enough. Use this time to establish a disciplined process for replenishing or adding to your rainy-day fund. Set up an “auto-payment” to yourself, such as a monthly direct deposit from your paycheck into your cash reserves.

Are your investments low-cost, globally diversified investment portfolio with the money you’ve got earmarked for the future. Your best shot at achieving your financial goals are by maintaining an appropriate balance between risks and expected returns. Keeping yourself conscious of these long-term returns is crucial; remember that your investment plans will outlast a period of market volatility.

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. No matter your circumstances, the fundamental piece of advice is to avoid making an uninformed decision.

Creating a mix of stock and bond asset classes that makes sense for you; periodically rebalancing your prescribed mix (or “asset allocation”) to keep it on target; and/or adjusting your allocations if your personal goals have changed. It also includes structuring your portfolio for tax efficiency, and identifying ideal holdings for achieving all of the above.

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.⁷Remember that, historically, the stock market has recovered.⁸

Bear markets are a normal part of investing. It’s hard to see an upside as anxiety spreads amongst investors. 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. Until then, focus on what you can control, to name a few possibilities: we’ve continued to proactively assist clients this year with their portfolio management, retirement planning, tax-planning, estate plans and beneficiary designations, insurance reviews, college savings plans, and more. Focus on strengthening your own financial well-being rather than fixating on the greater uncontrollable world around us.

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.

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