Understanding the nature of investing can help manage feelings of stress and anxiety to ensure you remain on track and to maximise the enjoyment of your investing journey.
Simply put, investing involves risk and uncertainty, which can be scary.
The fear of losing money can lead to stress and anxiety, and watching market volatility and constantly monitoring your portfolio can amplify these feelings.
The pressure to make the right investment decisions adds to the stress, as does the overwhelming amount of financial information available.
It is also possible to come across people claiming to have an ‘easy investing secret’ to make sure your money ‘only goes in one direction’ (up!) and remove the complexity issue, which can just add to the stress. Have these people really come across a secret that nobody else knows and can solve all your investing problems? The short answer is, no.
There are no secrets in the investing world (or at least, very few…) that could have significant impacts on your portfolio. This means that, were such easy tricks to exist, everyone would already be doing it!
Markets are inherently cyclical. They go through periods of growth (bull markets) and decline (bear markets).
If you wake up one day and see your portfolio has dropped by 1%, 3%, or 5%, but then increased by 1%, 3%, or 5% the next day (or higher / lower), do not worry. Behaviour such as this is normal.
Understanding that these cycles are normal and inevitable can help reduce stress.
The good news is that, historically speaking, markets have trended upwards over the longer-term.
Naturally, past performance is not indicative of future returns, but it can be re-assuring for short-term anxiety and stress.
Remember, investing is a marathon, not a sprint.
Constantly checking your investments can lead to unnecessary stress. Short-term market fluctuations can be misleading and may prompt impulsive decisions.
It is easy to become worried if your investments fall for one continuous week (or more), but if your time horizon is in another few years (which it hopefully is!), take time to breathe and relax.
Instead of constantly checking your investment value, set periodic reviews of your portfolio. This approach allows you to stay informed without becoming overwhelmed by daily market movements.
If you are involved in investing, you will hopefully have been told that your investments can go down.
Accepting that investments can lose value is critical. Markets will have ups and downs, and no investment is risk-free.
By understanding this, you can better prepare mentally for potential losses.
Please note that all content within this article has been prepared for information purposes only. This article does not constitute financial, legal or tax advice.