This may sound crazy to some of you folks out there, but I absolutely love this question because this has the potential to be an impactful learning moment. It’s one that if you lean in with a willingness to learn, you can positively reshape how you think about your investments.
In all fairness to you, the reader, you’re understandably nervous about your investments. The world is chaotic and the markets reflect that.
You’re worried about your future, your children’s future, and maybe even the future of your grandchildren. Heck, as an investor, human being, and a father myself, I completely understand how you may be feeling in light of the current state of the world.
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Of course, the world has always been chaotic. War, famine, natural disasters, political unrest, pestilence … these events have defined much of human history for thousands and thousands of years. It wasn’t until this generation, however, that we also found ourselves bombarded by never-ending coverage from 24-hour news channels — our very own Greek tragedy chorus — with small computers in our pockets that provide access to virtually unlimited information any time, anywhere.
So, as unprecedented as many of the events we’ve experienced have been, we cannot forget our history. For example, did you know that during the presidential election of 1876, armed militias surrounded the courthouses in the south to force a vote in specific direction?
Much of the fear we possess about the stock market is rooted in our uncertainty about what is happening in the rest of the world. And fear, science shows us, can spread like a contagion. That means who you spend your time with (and what information and news you consume) can significantly influence how you feel about the world — as well as your investments.
In fact, I’ll be honest, I can tell from client conversations what their friends think, what television shows they’re watching, what the folks in the local church group are talking about with each other, whether or not they still have a job, if they’re alone, and so on, without them telling me.
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No, I’m not suggesting you suddenly pull away from friends and loved ones, stop listening to the news, or never, ever succumb to fear about the current state of affairs. It’s OK to have feelings; it’s normal to experience fear. Where folks get tripped up when it comes to managing their investment accounts is allowing fear to dictate your actions.
Typically, this manifests in two types of fear …
Fear of missing out (or “FOMO”) has caused many investors to make mistakes. They buy or sell too quickly, worried they’ll miss out on a lucrative opportunity, only to regret their actions later when they assess their losses, rather than the gains they expected.
On the other side of the spectrum is the fear of loss:
“I’m afraid I’m going to lose money.”
“I’m afraid I’m not going to make money.”
“I just can’t stand this up and down anymore, it’s making me sick with stress.”
I’ve gotten hundreds of calls of this nature over the past few months from friends and others. Smart people who are afraid of how the current market landscape could potentially break them. One day, they want to move to something steady, like bonds. Four or five days later, they see the market tick back up, and they want to move back into stocks.
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Again, to feel fear is to be human. I’m not penalizing you for that. What’s critical is developing your self-awareness as an investor, so you make informed decisions based on facts, not feelings. Yes, taking a risk — striking while the proverbial iron is hot, as it were — is when we yield returns. That’s what we’re taught, right? But that’s not necessarily true.
This is how you lose money, because you’re not thinking strategically about your investment choices. You’re making emotional decisions in the heat of the moment, when your fears are running high.
Now, what does this mean for how often you should check your investment accounts?
Fear can drive us to extremes. In the case of checking your investment accounts, there are those who check their accounts too little (“I’m scared to see what’s happening!”) and those who check their accounts too often (“I’m scared, and I have to know how my money is doing every second of the day!”)
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Usually, fearful investors tend to fall into the latter category. But you know what’s funny? This kind of real-time access to our investment accounts is relatively new. In fact, I read something a while back that talked about how much more money folks made in the 1990s — the days of complicated quarterly statements, with no ability to make spur of the moment decisions, based on the news of the day.
Back then, investors were forced to give their investments time. Today, with so much access, it’s becoming much harder for investors to exercise the patience necessary to be truly successful. Media tickers with stock information running at the bottom of our screens, which are for traders, encourage us to think and operate like traders.
Of course, you should check your accounts. Never be afraid of the truth. If you find yourself doing so from a place of emotion (whether that be flares of unfounded fear or impulsive excitement), however, that’s when you’ll increase your risk.
Instead, develop a financial plan and stick to your plan. Set yourself a regular rhythm of when you check your accounts that matches your personality — once a month, once every two months, etc. If you don’t like what you see in your accounts at that time, make a plan to address it. And then, once again, follow that plan.
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I say this as an emotional person myself, who is in no way immune to stress or fear. But remember, each of us are blessed with the gifts of power, love, and self-discipline to move through those fearful moments, to handle what God has given us to manage.