Fear of Heights
It's natural to fear heights. It keeps primates alive. It kept (most of) us from jumping out of our cribs when we were babies.
Acrophobia affects 2% of homo sapiens.
Unofficially, stock-acrophobia affects 98% of investors. Do you know that recently all three stock market indices reached their all-time highs? How does that make you feel? Honestly, you might feel good about that. I do.
But you might feel scared. One reason is that the last time this happened was right before the dot.com crash. Does it bring back bad memories? If so, treat it like you would a traumatic event; here is an article with practical advice.
"The more you feel the more you heal."
For acrophobics, "The visual cortex becomes overloaded resulting in confusion. Some proponents of the alternative view of acrophobia warn that it may be ill-advised to encourage acrophobics to expose themselves to height without first resolving the vestibular issues."
For "acrophobic-stock market" investors, it might be a good idea to talk, a lot, with an expert, before you invest or you're likely to feel the whole thing, all over again.
Stock market losses (real or imagined) are not nearly as serious as physical trauma, unless you act. The effects of acting on our emotions can be devastating if they involve selling out of our retirement plans. We might pay a financial price for the rest of our lives. That's serious stuff.
A traumatic experience does not always have to involve life and death. In fact, some of the worst traumas are the ones that are existential threats--like stock market crashes--because we ignore them. Whether real or envisioned, physical or not, our brains cause our bodies to release the same chemicals, and physically we go through the same steps as we do when we are actually threatened.
Take a second and think about this. Stocks could make your body go through the same chemical reactions as a soldier in combat.
Many investors, and a number of my peers, suffer from 2008 PTSD. Several of us at AIFS recently met with a number of 2008 PTSD advisors recently at a conference in Vail. They are wonderful people; they work hard and honestly for their clients. Yet their investment decisions are driven by fear of 2008 all over again. Like an addiction, fearing (loathing, hating) this stock market is hard to give up!
So if you're there--feeling awful about a boring, upward-trending, average stock market, ask yourself, "What can I control?" The stock market? No, of course not. My investment returns? Hardly. The investments I'm in? Yes, I suppose, but to what end? My time horizon--how long I live? Nope.
I can control my perspective. I can control my spending and savings. I can, if I want to, change how I feel about things.
Over the long haul, investing in fearful times is normal. What has changed is our perspective. We have more of it. We have more insight. We hear more chatter. We feel like we have to act fast. Or act at all. But over the long haul, stocks provide potentially better returns than other investments because of the noise and fear and loathing and, dare I say, hatred, they create.
Read more on this from Nick Murray (e-mail firstname.lastname@example.org to request a copy of this month's Client's Corner article; we're not permitted to post it directly to our website).