Is the market stressing you out?
For millions, the Covid-19 crisis has been a source of financial heartburn. Maybe you’ve been furloughed or lost your job. Maybe you’re busier than ever and feel burned out. Investors in every market have seen massive and sudden changes. Volatility is the highest I’ve seen since October 1987. And this is the largest volatility spike ever that’s been linked to a medical crisis.
Living through a crisis is stressful enough, with worries about our our health and that of our loved ones. Feeling hopeless about crazy markets just makes everything worse. If you find yourself losing sleep over your finances, here are some dependable ways to reduce stress and make a plan for what comes next.
1. Keep Yourself Healthy
Health care professionals long known that stress hurts us in multiple areas. It impacts our sleep, our thinking, and our physical health. In times of financial as well as social uncertainty, it’s important to first regulate your mental wellbeing; high stress levels actually change our perception, increasing the likelihood of making impulsive decisions.It’s wise to consider certain stress-managing lifestyle changes before making any big investment-related decisions.
Less Stress Without Changing Anything
Stress makes us feel out of control. So it’s crucial that we take control of our lifestyle, before making any big changes. The following suggestions are a place to start:
- Focus on wellness. Everyone tells you to do these things, and they keep coming up because they work: get enough sleep, exercise regularly, eat well and practice mindfulness. Give yourself time to do things that make you happy, or explore a new hobby.
- Don’t self-medicate. This 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. Extremes are the enemy; moderation should be your goal.
- Stay connected. Personal relationships increase personal resilience.The combination of financial stress and “social distancing” makes us all feel isolated. Lean on your support system and connect with friends and family – even digitally – to avoid being consumed anxiety.
2. Deal with the Volatile Markets
While all this may help us cope with stress, eventually we have to confront the elephant in the room and the source of all our stress: the we feel about our finances.
The first step is to accept what’s happening economically. The bull market of the past 11 years took a swift downward spike, and we’re now in a period of adjustment. This doesn’t mean we have to live in a constant state of angst, nor should we stick our heads in the sand and hide. When we think about our exposure to the markets, it helps to keep these guidelines in mind.
Take a Break
Obsessing over market news never really helps, but it can be especially harmful during market downturns. Investing is a long-term business; it’s a a marathon, not a sprint. Constantly looking at our investments can just increase our aggravation. The same can be said about financial news. How many times do we need to hear the anchor recite the daily change and volume? This just increases the chance that we’ll make hasty, emotionally-driven decisions. Step away from the market and reflect why we’re investing in the first place.
Check Our Investing Goals
While market volatility is rarely pleasant, volatile times are an important reminder to reassess our long-term goals and how they are reflected in our portfolio. Why are we invested this way? What do we want our money to do? Has anything changed in our lives that would suggest that our exposure to the stock market is too high, or perhaps too low?
Despite changes in the market, the economy, and the wider world it’s likely that our long-term goals remain the same. Remember that long-term returns tend to be fairly stable; our investment plans are mostly a result of our lifestyle, our goals, our cashflow, and other factors that have little to do with Covid-19. If you’ve lost your job or your business is facing issues, you may need to tap into emergency funds. But that should be a deliberate decision made in the most tax-efficient manner.
Making Good Decisions
Talk with your adviser about your concerns. If you don’t have a financial adviser, this might be good time to find one. No matter what your circumstances, avoid making rash, uninformed decisions. Patiently watching a portfolio fall in value is pain– but note: over the past 100 years, bear markets fell, on average, by a third, while bull markets went up one and a half times.
In the long run, stock markets grow because economies grow. Bear markets are a normal part of investing. It’s hard to see the upside when fear seems rampant. And it’s understandably stressful when you feel the security of your investments is threatened – but we can’t allow a virus-driven market to push us around. Long-term returns will outweigh short-term losses. Until then, focus on your mental wellness and solidify your financial plans.