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. 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 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. 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. 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 overconsuming 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 your investments 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?

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 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. 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.⁷

Remember 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 your mental wellbeing and solidify your financial plans.

Beacon Hill Private Wealth is an independent, fee-only, fiduciary investment advisor providing evidence-based wealth planning solutions that simplify our clients' financial lives. Founder Tom Geoghegan, CFP®, MBA is also a member of the National Association of Personal Financial Advisors (NAPFA).

During a crisis, we all want to do something, not just sit idly by watching things unfold. If you have questions about your own situation, or want to further discuss your financial planning and investment needs, please reach out.

Life is uncertain. The market is even more precarious. This means building wealth has no shortcuts. Success requires a solid investment approach, a long-term perspective, and discipline to stay the course. Instead of leaving your financial future to chance, you need to have, and then keep to your plan.

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Past performance is no guarantee of future results. There is no guarantee investment strategies will be successful. Investing involves risks including possible loss of principal. Investors should talk to their financial advisor prior to making any investment decision. There is always the risk that an investor may lose money. A long-term investment approach cannot guarantee a profit.