Do you have money on the mind? It may adversely affect your physical and mental health, particularly if you’re invested in the stock market.
A 2014 study by two University of California at San Diego professors tracked hospitalizations in California over three decades and found daily fluctuations in stock prices had “an almost immediate impact on the physical health of investors, with sharp price declines increasing hospitalization rates over the next two days.” The effect was even stronger for conditions related to mental health such as anxiety, panic attacks and depression.
For a particularly dramatic example, the researchers looked at Oct. 19, 1987 – nicknamed Black Monday – when the U.S. stock market fell by almost 25 percent. Hospital admissions in California spiked more than 5 percent that same day, which the authors say suggests stock declines have an almost immediate impact on the psychological states of investors. The very next day, hospital admissions returned to normal.
After a relatively smooth 2017, stock market volatility has returned in 2018. Could it be impacting your mental health? Here are some steps to take to calm stock-market-induced anxiety.
Study past downturns. “Anxiety comes from the unknown,” says Mark Struthers, a financial planner and owner of Sona Financial in Chanhassen, Minnesota. “You don’t have to be a CFA, but if you have a basic understanding of risk, 401(k)s and the capital markets, much of your anxiety will disappear.”
As a financial well-being coach, Struthers holds one-on-one sessions to help clients understand their investments. He takes them through a real-life worst-case scenario, showing them how their current portfolio performed in the Great Recession, and then prompts them to consider how they will react in future downturns. Investors who didn’t panic and sell their stocks at the market’s bottom in 2009 fully made back their losses by 2013. And those who viewed the downturn as a buying opportunity benefited from huge gains during the upswing.
“They are often shocked,” he says. “But having the conversation about the risk/return trade-off prepares them for a market downturn. If it happens again they won’t be caught off guard and panic.”
Have an investing confidant. Have an investing buddy who you can confide in when market volatility is making you feel nervous or even depressed. It could be a cool-headed friend or family member. Other options include joining an investment club or hiring a financial advisor. Some advisors are even trained to offer financial therapy. A small industry group, the Financial Therapy Association, lists some such professionals on its website.
“Having an accountability partner can be a key factor in helping to navigate the emotional roller coaster of investing,” says James Moore, an investment adviser with Campbell Financial Partners in Fort Myers, Florida. “Talking through the emotions can help investors stick to their plan, rather than making decisions based on anxiety.”
Silence the noise. Sometimes, following too much financial media can cause investors additional stress.
“The stock market can be very confusing to many investors. One of the reasons behind this, is just to look at the breadth of information that is available to almost every investor today,” says Feraud Calixte, a senior financial advisor with Triad Financial Advisors in Greensboro, North Carolina.
One way to combat the stress is to cut down on the noise and delegate investing to a financial advisor instead, Calixte says.
Another even easier strategy: Unplug from financial news media altogether and stop checking your 401(k) balance, says Rick Waechter, founder of Old Peak Finance in Chapel Hill, North Carolina. He recommends investors look at their portfolios once a quarter, at the most, and only make adjustments once a year to re-balance their allocations.
“If the market volatility bothers you, the first thing you should do is turn off all cable news,” adds Joe Sallee, a managing partner and financial adviser for Bay Capital Advisors in Virginia Beach, Virginia.
Have a plan. “Decisions should be made based on a plan, not on emotions,” Moore says.
A good plan accounts for market volatility – both positive and negative – and has a strategy in place regardless of the market cycle. Investors who experience little-to-no anxiety understand their goals, time horizon and risk tolerance and are committed to the long haul.
“Those that experience anxiety when investing seem to do so because they lack a plan and they’re not really investing, instead they’re speculating. There’s a big difference between the two,” says René Bruer, a financial advisor and co-CEO of Smith Bruer Advisors in Tallahassee, Florida.
Re-center on your long-term goals. Whenever you feel the investing jitters, it helps to visualize your big-picture goals. Are you saving for a child’s future college tuition? Imagine him or her in a cap and gown at graduation. Are you accumulating a nest egg for retirement? Visualize yourself on the golf course, at the beach or checking off other fun bucket-list pursuits.
“Taking on risk and stress for no reason would cause anyone anxiety,” Struthers says. “But if you see how that 401(k) is the fuel for a retirement dream engine, then you’ll know the sacrifice is worth it.”
