Stock Market Feels
Money can elicit strong feelings in all of us. Great exuberance and great sorrows. Big hopes and big fears. We value money so much because we see our personal freedom growing or shrinking as our money does the same.
There are few places where you can watch the value of your money grow and shrink in value as rapidly as it does in the publicly traded stock market. Your house changes in value every moment, as do your vehicles, as does the value of your work, but we don’t see those changes, so they don’t drive us bonkers. However, we see values change in publicly traded stocks in real-time, every single business day.
Many families have significant portions of their net worth in market investments, so we are captivated by the stock market. We aren’t just watching the value of stocks swing in value. We are really watching and feeling the continual swing of our personal level of freedom.
I don’t believe it’s smart or healthy to tie how “free” we feel to how much money we have. There’s more reliable and consistent ways to find our freedom and value as humans. But we aren’t perfect people, and the reality is in the United States, our perceived freedom and satisfaction in life is largely tied to our net worth.
This creates an interesting and possibly toxic recipe. The pursuit of the euphoria of gains in value, or more typically, the avoidance of the pain of loss, clouds your judgement to make wise money choices. These emotions often work to sabotage your long term satisfaction by causing you to make choices history tells us do not work.
The pursuit of gains causes many to take too much risk, essentially gambling with their family’s financial future. A select “lucky” few might come out ahead, but most will lose, and lose big.
The avoidance of loss causes many to not take enough risk, essentially wasting the opportunity to let your resources be used productively, increasing your resources and increasing your options.
What’s more is the short term media cycle picks up on these feelings and reinforces them. It’s not the media’s fault, they simply give us what we want. But it doesn’t mean seeing the stock market’s movements reported on a weekly, daily, or even constant basis is good for you and your long term well being.
That leads me to a confession. Although a portion of my job for my clients is to advise on investments, I rarely pay attention to what the stock market is doing on a given day. Because I advise my clients on their long-term plans, goals and dreams, what happens on a daily basis in the market is not relevant. What happens over 3, 5, 10, and even 30 year periods in the stock market is what matters to my clients. It could be downright harmful for me to put too much thought into the short term moves of the market.
I encourage you to put similar safeguards in place. Know yourself, pay attention to those feelings related to your money and the stock market, and keep aware of how the media influences those feelings.