The Wednesday Wellness threads are meant to encourage users to ask for and provide advice and motivation to improve their lives. It isn't intended as a 'containment thread' and any content which could go here could instead be posted in its own thread. You could post:
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Requests for advice and / or encouragement. On basically any topic and for any scale of problem.
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Advice. This can be in response to a request for advice or just something that you think could be generally useful for many people here.
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Notes -
Avoiding making mistakes is typically a perfectionist issue, and can lead to risk avoidance.
And anxieties about money are very common.
The standard response that I would recommend in your case is figure out what your investment timeline and risk tolerance ought to be in terms of stocks/bonds/REITs, then start investing in low-cost index funds.
And just don’t look at the numbers.
Automate that shit and avoid being triggered. A financial advisor might be called for, but you have to be careful because boy are incentives misaligned there by default. If you want to get to the point where you can make investment decisions in a car-by-case basis it sounds like you might have to invest in formal therapy.
A tale of caution:
I had an older coworker who was very conservatively invested even though his house was paid off, he and his wife still had a decade of career left, and their kids were doing well with college paid for.
So I explained that standard advice would be he should adjust his portfolio, and he agreed it made sense to shift his allocation towards stocks.
This was in late 2019.
So, naturally, the anxiety that had led him to avoid optimal exposure to stock over the years caused him to sell when the market plunged. He listened to me give standard advice once, but didn’t talk to me when he got nervous. Emotionally, now it’s even worse because COVID did not destroy stock values forever and so obviously my “buy and hold” advice was right because it always is, short of a level of catastrophe the US has never experienced.
So he lost a painful chunk of his portfolio and, I imagine, hasn’t tried to reallocate back towards stock. So he locked in losses and now has a low-growth portfolio. He’ll be fine overall with his decent pension and responsible living for decades (a Jew married to a Korean, so relevant stereotypes apply), even if his investments were zeroed out. (That’s why I thought he would do well with accepting more variance in his portfolio… but actually risk aversion was the driving force.)
I’d feel bad about it but for the fact that level of emotional incompetence can’t be helped in someone old enough to have lived through the dotcom and 2008 crashes as an adult.
You know, the funny thing about this is that, unless you were invested in stocks at the time of the dotcom bubble or the 2008 crash, it won't help your emotional incompetence. Part of my learning to stay calm and hodl on was panic selling my 2 year old 401k (moved from stocks to money market) at the bottom. I had just started working, I had a very small amount in it, and it was a valuable lesson I had to learn the hard way. Sure would have sucked to have put that off for 40 years instead.
Well the individual in question was old enough to have had been invested in some stock during both. He was just in a conservative portfolio in his mid-50s (so he lost out on a ton of growth over 30 years). When I talked to my dad (same rough age) about investing he definitely knew the lesson of not pulling out in a downturn.
But overall I think you’re right about most people. I had also got my first adult job just before the 2008 crash and I was in a position where I had put a hell of a lot of my pay into my investment fund. (I was in the military so I didn’t have a lot of extra expenses for a few years.) It sucked watching the numbers go down but it wasn’t like pulling out a few grand ~40 years before I hit retirement was going to make sense. And I had read enough about buying and holding to not be tempted.
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Thanks for the reply.
Yes, the advice in the book I'm reading on investing is to put most of ones money into a low cost index fund and to automate the adding of more per month. It's not particularly fun though, and the desire to "time the market" is coming up. But I'll do it, I think. I'll keep some money in cash (high % savings account with quick withdrawals) and perhaps bonds, for which to use to buy cheap stocks after the next crash. There's always another crash. Once every 6-12 years, I've read.
I intend to succeed in resolving the emotional issues around this, because I don't like the idea of giving up and accepting pains and limitations when they can be repaired, and because risk aversion and avoidance affects other areas of life too. I've worked through much bigger problems in the past. Meditation and CBT are great for me. Formal therapy less so, but maybe I was unlucky. I've started on CBT exercises prescribed in the book Woulda Coulda Shoulda and I'm softening the stress responses related to risk/loss by bringing them up in my meditations.
I've got time to put into learning about investments, economics, company analysis etc, so that's another motivation to get to a point where I can gamble a bit on individual stocks. :) Something like 10% of my savings will go to this.
The tale: Locking in losses, ouch, I did that too. Though in my defense I was very young and was wrecked by illness at the time. Investing is an area where "once burned, twice shy" can become very expensive through missing out on the recovery. Losing money seems to be very closely tied into starting up some serious stress, existential anxiety and poor thinking. It seems that even one major painful stimuli can establish a belief of "it'll crash again as soon as I risk money again, I just know it" or something like that.
Keep in mind that if you run some scenarios on holding bonds to buy cheap stocks during cyclic downturns you might find that timing the market (even optimistically doing so near optimally) might not pan out because of lost gains during all the years when stocks just did average.
You bring up another good point that I know some people do and I wish I did (or could do, now; I have a job that prohibits playing the stock game). Some people employ a strategy that’s like “90% boring index funds and assets based on standard investing advice” combined with “10% YOLO/WallStreet Bets/trying to beat the market”. Helps scratch the day trader itch and limits downside risk ruining one’s retirement.
Something like that, having a set level of risk, might help you edge away from the anxiety.
Sorry about the late reply.
I have thought about this. The old quote comes to mind: "The market can stay irrational longer than you can stay solvent." Even if there 'should' be a correction coming, the fed and others might kick the can down the road for a long time. Years of growth, so that the loss that comes from a crash might not even wipe out all the gains.
I've thought about the possiblity of selling non-callable bonds when interest rates go down. That makes them more valuable. But I'm not sure exactly how to buy them and how to sell them. And what if the markets crater without the interest rates actually going down? What if inflation is high at the same time?
Shrug
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