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 we have been living through the largest volatility spike linked to a disease outbreak in history.¹ Living through COVID-19 is stressful enough. If you’re one of many worrying about your investments as you scroll through headlines, these are some dependable ways to reduce stress and make a viable 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 and geopolitical 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. Social support increases resilience to stress.⁵ Experiencing the combined effects of financial stress and social distancing measures from coronavirus makes people susceptible to feeling isolated. 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 right now.

The first step is to accept what’s happening economically and geopolitically. The optimistic bull run of the past decade+ took a swift downturn, and we’re now in a period of inconsistency.⁶ That doesn’t mean investors have to live in a constant state of stock-induced anxiety, although it can be difficult not to if you find yourself reading the news daily. In how 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. 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 (or simply, in general). Hyper focusing on negative headlines 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 long term perspective.

Assess Your Investing Goals

While you should avoid over-checking it, seasons of volatility can be 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? Every dollar, every account, has a purpose. What is the purpose of your money? Despite a dynamic stock market, it’s probable that investors’ long-term goals remain unchanged. Keeping yourself conscious of these long-term returns is crucial; remember that your investment plans will outlast inevitable periods of market fluctuations. They are called market cycles for a reason. Every correction we go through isn't the first correction and it certainly won't be the last. While you may be operating in a state of fear, greed, or overwhelmed catatonia...Could there be opportunities right now to improve your overall financial wellbeing that you are not taking full advantage of through your own impulsive actions or, alternatively, through your total inaction? Most likely, yes.

Making Investment Decisions

Talk to your financial planner about your concerns. If you don’t have a planner, or you have questions, now is an opportune time to visit regarding your financial plan. No matter your circumstances, fundamentally, you want to avoid making uninformed decisions. Patiently observing 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

Remember that, historically, the stock market has recovered.⁸ Bear markets are a NORMAL part of investing. It can be hard to see an upside as anxiety spreads amongst investors, especially if the market is down for any sustained amount of time.

Long-term returns will outweigh short-term losses and now is an excellent time to review monthly contributions to take advantage of dollar cost averaging, if you've not yet done so. If you are already retired and taking income from your accounts, now is the time to review the sustainability of your income strategy and see where adjustments may need to be made. Regardless of age, it is ESSENTIAL that everyone keeps a healthy emergency fund, so that you are not resorting to selling out of investments in times when they may be down in value over the course of the next year.

Above all else: focus on your own responsible actions, improving your mental wellbeing and solidify/update your financial plan. What is ONE thing you can do today to put yourself in a better financial position tomorrow? Is it paying off that lingering credit card balance, increasing what you add to your retirement each month, paying your taxes, setting up a business retirement account, setting a recurring calendar date with yourself to review your finances/balance sheet...? Pick ONE thing. Work on that ONE thing. Then, keep it going!

This content is developed from sources believed to be providing accurate information. 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.