Investing can be a powerful way to grow wealth. But tumultuous financial markets have a cost — both to your pocketbook and your psyche.
7 min read
These statements are intended to provide general information and do not constitute investment advice or any other advice on financial services and financial instruments such as stocks and ETFs. These statements also do not constitute an offer to conclude a contract for the purchase or sale of stocks and ETFs. Stocks and ETFs can be subject to high fluctuations in value. A decline in value or a complete loss of the money invested are possible at any time. The values depicted are fictional and for illustrative purposes.When it comes to making the most of your money, investing can be a great way to reach your goals. Exposure to equities over the long term has historically shown strong gains — making stocks and bonds an important aspect of many financial strategies. But the tumult of markets have left many of us apprehensive about investing and fearful of losing our hard-earned money. And with so many alarmist headlines, it’s hard to know how to stay calm and make educated decisions when things seem shaky. The fact is that investing has its risks — but you can also reap its benefits if you keep your head on straight. This takes a solid investment strategy and (sometimes) the patience to ride out the market slumps. In this article, we’ll talk through the anxieties that may come up when investing your money, and how to overcome them to achieve real success.
Anxieties about investing: it’s normal!
If you’ve been sweating the stock market crashes and general economic upheaval of the past two decades, you’re not alone. While finance aficionados may make it look easy to keep cool, in reality it’s totally normal (and understandable) to freak out over market dips. Your personal circumstances can affect your level of investment anxiety, too. If you’ve got a lot of money riding on your portfolio’s success, you’re more risk averse, or you’ve had financial difficulties in the past, you might feel more susceptible to stress.Whether you’ve already started investing or are contemplating taking the plunge, some unease comes with the territory. However, with a bit of planning, patience, and perspective, you’ll be able to cope with the ups and downs more easily and effectively. Oh, and remember: Investing can be a risky business, so never invest more than you’re prepared to lose!
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While you may not be able to alleviate all your worries around investing, there are measures you can take — from behavior and education to habits and routines — that will calm your nerves and help you stay the course. Let’s take a look.
1. Educate yourself
Before you start investing, it’s wise to get your head around the basics of strategy, returns, and risk. After all, knowledge is power. Studying up on investing basics like stocks, bonds, wealth management, taxes, and more can arm you with the knowledge you’ll need to succeed. The wiser you are about investing, the more you’ll be able to craft a strategy that insulates you from the worst outcomes. And the better your strategy, the more you’ll be able to weather the volatility that might otherwise wreak havoc with your peace of mind. There are plenty of ways to learn about investing, from articles to books to webinars. Alternatively, you can work with a financial advisor to help you manage your money in a way that suits your needs and temperament.
2. Look before you leap
Fears around investing are understandable. However, whenever we let our fears govern our actions, we risk making decisions that harm our financial wellbeing in the long run. For example, though the losses incurred in a stock market crash can be devastating, pulling your money out when the market is down may prevent you from realizing the gains when the market rises again. The inverse is also true: Impulsively buying stocks without considering how they fit into your broader strategy can backfire, big time. So, get a second opinion (or three) before you make a big investment or change to your portfolio. And if you’ve got a solid strategy in place, stay the course — it may pay actualdividends in the long run.
3. Keep your eyes on the prize
We all know the saying about best laid plans — and these learnings may be especially true in the universe of equities. However, the more concrete your goal is, the easier it will be to meet. Having a solid investment objective can mean the difference between peace and panic. Why? Because any sound strategy will align risk capacity, time horizon, and budget to account for market volatility. No matter how far out your goal is, if you have a plan you can stick to, you’ll be well positioned to stay the course — even if the ride gets bumpy at times.
4. Know thyself
No two investors are built alike. We all have a unique financial persona that dictates how we handle our money — and how we invest. Those with certain personality traits may be more prone to stock market panic than others. And some investors are more likely to embrace a risky strategy in the hopes of achieving higher returns. So, when planning how and what to invest in, consider how your approach to life impacts your relationship with money. How comfortable are you with risk? How easy is it for you to tolerate upheaval? Do you prefer a slow and steady approach or a fast and furious one? The better you understand your approach and preferences, the better you can circumvent market anxiety later on.
5. Consider the bigger picture
While you don’t have any control over the market, you can control your reaction to it. One important way to handle investing anxiety is to remember that each market boom or crash is a comparatively brief moment in time. History has shown us time and again that what goes down will likely come back up, and vice versa. That means that financial market fluctuations may not matter as much as you think they do in the moment. So, take a deep breath and zoom out a bit — and if necessary, take the steps you need to reorient yourself and your portfolio toward your end goal.
6. Understand when to engage and when to unplug
Financial markets impact many aspects of our lives and economy, so it’s important to keep tabs on what’s happening there. That said, you may find that checking the Dow Jones every day might not be particularly helpful for your psyche. We live in a hyper-digital world where breaking news and panic headlines are only a tap away. Sometimes, staying unplugged may even be the best thing for your financial wellbeing. Instead of following the market’s every rise and dip, focus on yourself and what you can control. That might mean improving your work-life balance or planning a budget vacation. The more you can keep things in perspective, the less anxious you’ll be about your investment portfolio.
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Want to set money aside for a rainy day? Then try Spaces, our virtual piggy banks that sit right alongside your main account. And, if you want to save a portion of your income before you start spending, try Income Sorter to automatically set aside some of your incoming funds. With so many intelligent features, N26 is the bank you’ll love from day one. Select an account today to get started.
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