Investment anxiety can be a silent dream-killer. Left unchecked, it can encourage regrettable … More
A recent study by financial analysis app maker The intellect AI sought to score investor anxiety by analyzing the frequency of fear-based search terms like “market crash today” and “big sell-off.” The report concluded that the investing outlook around the U.S. is cautious, with regional pockets of high anxiety. Investors in Oklahoma, Utah, Kentucky and Nevada are particularly stressed.
Investment anxiety can be a silent dream-killer. Left unchecked, it can encourage regrettable trading decisions or keep you out of the financial markets entirely. Moving too quickly or too slowly with your investment plans can seriously challenge your ability to reach financial goals.
The good news is, you can beat the anxiety—even as the S&P 500 shows its volatility and economic headlines share more bad news than good. Try these five strategies to restore calm and begin making real progress on your wealth-building agenda.
1. Commit To Indefinite Holding Periods
Investment anxiety can come from the desire to control an uncontrollable situation. When your portfolio value falls, you naturally want to take action—perhaps by selling securities or cancelling your 401(k) contributions. Unfortunately, these actions are often counterproductive.
Doing nothing is usually the better way to preserve long-term investment returns. For example, keeping your portfolio intact when the market is down positions you to benefit from future gains. And continuing to invest allows you to increase your share count at lower share prices.
To begin building the discipline needed to do nothing when the market goes sideways, commit to holding your stocks indefinitely. This may require a different methodology for choosing stocks. For instance, you’d prioritize stable companies with savvy leaders who’ve proven their ability to manage through tough times. Or, you could implement a fund-based centered on the S&P 500 or a similarly respected benchmark.
The goal is to own stocks or funds that are unlikely to be fundamentally and permanently changed by a downturn. When you know your portfolio is resilient, you can muster the confidence to hold when everyone else is selling.
2. Document Your Strategy
Documenting your investing strategy can also quiet anxiety-producing thoughts. Look to make your investing as formulaic as possible. Write down how much you’re investing, what you’re buying and what factors could prompt different decisions. You can also document how you will handle a future market downturn.
Then, support your strategy by automating your ongoing investments. Automation reinforces the habit of doing nothing, despite what is happening in the market. And, if you feel the urge to interfere with your automated investments, revisit your documented plan first. Remembering your confidence in the plan when you wrote it can help conquer the second-guessing later.
3. Disconnect
Disconnecting from financial headlines is another powerful calming practice. You do not need to read every bit of bad news. Consider filtering any investing newsletters into a folder in your inbox and changing your browser’s default homepage.
These actions are appropriate if you are committed to indefinite holding periods. Under the buy-and-hold approach, economic and financial market headlines are less critical than if you were attempting to time the market. As long as you are confident your equities will survive a downturn, temporary and short-term volatility is mostly irrelevant.
4. Shift To An Income Portfolio
Income portfolios can be less stressful to own than growth portfolios. Whether you prefer investment-grade debt securities or premium dividend-paying stocks, periodic payouts provide more reliable returns than capital gains potential.
Debt securities and quality dividend payers also normally have less price volatility than growth stocks. Bond issues can rise when stock prices are falling. And many dividend stocks have built-in downside protection because they generate income in bear markets. The dividend payments may be the only upside equity investors experience when stock prices are falling. Logically, dividend payers can be an investor’s last choice for liquidation.
5. Fill Your Downtime
The same strategies for managing stress in other areas of life can also be effective against investing anxiety. You might take up a new hobby or try meditation. The goal is to limit the time you have to second-guess your investing decisions and search the internet for doomsday bear market predictions.
The truth is, bear markets happen occasionally. If investing is part of your wealth plan, you cannot avoid them. Your best option is to adopt positive, healthy habits that promote calmness in the face of stock market turbulence. Learning this skill can directly benefit your long-term returns and help you reach your financial goals faster.
