Stock market anxiety and stress: managing emotions in investing

Investors may worry about the market and their portfolio after the stock market fell drastically in 2022, slowed in 2023, and continued its roller-coaster journey.

In difficult circumstances, it’s necessary to step back, breathe deeply, and keep things in perspective. In this post, we’ll explore how to stay calm during difficult times and how to profit from market corrections and collapses in the long and short term.

This is not mental health advise, but rather a way to reduce stock market investor anxiety.

How to manage stock market anxiety
There’s no perfect method to deal with stock market anxiety, but these techniques can help you reduce stress and stay focused on your long-term financial goals.

1. Halt noise
When I turn on the financial news in the morning and see red quotes and anxious commentators, I think, “Today is a good day to do nothing.” Until things calm down, I don’t check my brokerage account balance or buy or sell.

The reason? Besides the mental health benefits of not watching your portfolio drop minute by minute, paying too much attention during volatile times might lead to impulsive, knee-jerk judgments. Everyone knows to buy low and sell high, but humans want to “sell before things get any worse,” which is the antithesis of investing.

2. Verify your belief
If you only own index funds, skip this section. As an individual stock investor, I prefer to review my portfolio and the underlying businesses when the stock market gives me worry (which occurs to everyone). I don’t care much about a stock price drop if a company’s earnings and revenue have been rising for years and my investment thesis is intact.

You can relax if you own amazing companies. The stock market will act—all of the most successful stocks have fallen by 50% or more. However, outstanding businesses can provide high long-term profits despite instability.

3. Zoom out.

Reminding yourself that you’re a long-term investor when you’re nervous about stocks is sensible. Visualizing that stock investors gain money over time is the greatest method to do it.

Consider this six-month S&P 500 trend through June 13, 2022. It looks scary:
Strategies to profit from turmoil

Finding the positive in difficult situations might aid long-term investors. Stock market losses might be used to your advantage in several ways.

Tax loss harvesting
Tax-loss harvesting involves selling lost investments to lower taxes.

You can offset capital gains in the same tax year by selling an investment at a loss. Thus, the IRS would only examine $2,000 of taxable gains if you sold a stock in January 2022 for $5,000 and another in May 2022 for $3,000.

The IRS lets you deduct up to $3,000 of capital losses from your other taxable income even if you have no capital gains. Losses exceeding $3,000 can be carried over the next year.

Selling investments for tax benefits is not advisable. If you’re on the fence about selling a failed investment and see other ways to use the funds, a market fall may be a good opportunity to cut your losses and move on.Look for deals
The real estate investing adage is “You make your money when you buy, not when you sell.” The premise is that longer-term gains depend more on the investment price than the selling price. This also applies to stock market investing. Asset prices usually rise over time, and you never know what a stock will be worth in 15, 20, or 30 years when you need the money. But you can still get deals today.

Nobody loves seeing their portfolio value fall. But one of my biggest investing attitude milestones was learning to see stock market crashes and bear markets as purchasing opportunities. Imagine shopping at your favorite store and seeing everything 50% off for a limited time. How would you react? Warren Buffett advised, “When it rains gold, put out the bucket, not the thimble.”

You must consider your risk tolerance and mental health. Even if you can’t sleep, don’t put as much money as possible in your brokerage account. If keeping a certain amount of cash in reserve or letting it build up during terrible times helps you feel comfortable, do it. However, market corrections and crashes have traditionally been good times for long-term investors to buy great companies.