Whenever something triggers a fear response, the easiest way to break the anxiety cycle is to take a reality check and think it through. Many times, you will realize that the reality isn’t as bad as the perception and the anxiety will will tamp down. Of course, that is easier said than done.

With everything going on in the world and in the market, many of us are facing cycles of anxiety when it comes to our portfolios and investments. Even those of us who consider ourselves even tempered and logical can fall into the trap.

Because of these high emotional periods, we may be tempted to make moves in the market that don’t serve our financial goals. On today’s episode, we are going to discuss the cycles of investor anxiety and some tactics you can use to break the cycle. If you don’t feel prone to these forces, chances are you know someone who is and you can share this podcast.

Stage 1: Fear of the Future

Stage one of this cycle is fear of the future. Will you have enough money to live on? How much should you save? Where should you invest? We all deal with these worries.

Unfortunately, no one can tell us what’s going to happen in the future when it comes to inflation, international conflicts, the pandemic, and the rest of the volatile events happening in the world. Most of the things we face today, were totally unforeseen not long ago. But we need to be conscious of the media predictions we are consuming (often wrong) and how that impacts our emotions and thus our financial decision making.

Stage 2: Track Record Investing

The second part of this cycle is track record investing. If you want a prediction for the future, what better place to look than the past? People tend to look at track records when investing in their 401(k) and IRA.

The problem is when we look back and follow previous investment strategies that have done well, the market may change, and now that investment does poorly. The perfect example is Tech stocks. People rush in, buying high and selling low. Remember Bitcoin mania last year?

Stage 3: Information Overload

With a 24-hour news cycle, the internet, social media, and the opinions of our friends and family we can become overloaded with information. Googling the term “Investing in Retirement” comes up with 198 million results!

Instead of reducing fears, this flood of information increases anxiety and it can be hard to know who to trust. That’s the benefit of working with a professional, an advisor who has the knowledge and objectivity to help navigate the complexities. 

Stage 4: Emotional Decisions

Anxiety often leads to emotional decision-making. This can be a result of how you grew up or how past market downturns stuck with you. Sometimes we get swept up in the hottest trends like cryptocurrency and become fearful of missing out. This can lead to the last part of the cycle: breaking the rules.

Stage 5: Breaking the Rules

The basic rules are buying low and selling high, diversifying, rebalancing, and repeating. Many people know these rules but we don’t follow them. But getting stuck in the investor anxiety loop costs emotionally and financially.

Next week we will talk about some strategies to break the cycle.  

Stay calm – Trust the process. 

If you have any questions for Don reach out at (732) 784-2867 or don@doncash.com.

Listen to the full episode to learn more or skip around to certain topics.

[0:55 ]– It’s hot here!

[3:36] – Phases of anxiety

[4:49] – A broken process

[5:45] – Fear of the future

[6:38] – Addicted to technology

[10:06] – You can’t predict the future

[11:15] – Track record investing

[13:22] – Information overload

[14:51] – Emotional decisions

[18:34] – Breaking the rules

[19:36] – How to overcome this cycle