3 ways to achieve stock market zen

Updated: Oct 5

It's been hard to watch the stock market this year. Markets around the world have gyrated due to a variety of concerns such as economic growth, the war in Ukraine, inflation, and rising interest rates. Here in Canada, we’ve seen the market decline about 9% so far this year, while the U.S. is down almost 20%. The gyrations have been significant, causing market-watchers to alternate between hope and despondency.


This is totally normal. The stock market isn’t acting strangely; rather, it’s doing what it’s supposed to do, which is to go up and down depending on the outlook and the sentiment of investors. We’ve seen the S&P 500 in the U.S. decline in 8 of the past 30 years, but over that time the market has gained about 2,500% or 11% per year on average. Markets have always recovered and there’s no reason for it to be different this time.


Reduce your stock market angst


Regardless of the facts, watching the value of your investments decline steadily over weeks and months is hard. It can be emotionally tiring and can add some degree of stress to your life, and no one needs more of that.


If you are invested for the long-term (and the stock market is only for long-term investing), then these market gyrations are not a real worry. It will pass, your portfolio will recover, and you’ll have stressed out for nothing. As Mark Twain said, “I’ve had a lot of worries in my life, most of which never happened.”


In the meantime, what can you do to reduce your concerns about your investments and achieve stock market zen? Here are three things I recommend.


1. Detach


Detachment is the process of letting go, especially letting go of expectations for a certain outcome. Detachment acknowledges that many things are outside of your control and you aren’t going to make an emotional bet on what will happen. Once you detach from wanting the stock market to rise, you can stop worrying about it. You should become indifferent about whether it rises or falls on any given day. Trust that the global financial system will not collapse, that stock markets are not going away, and that companies with real businesses will always exist. Don’t look at your investment account too often, stop following the market, and get on with your day.


2. Don’t speculate


Believe me when I say that nobody, and I mean nobody, can be consistently right about the direction of the stock market. Don’t bother reading the articles with headlines like “Stock market analyst says more downside to come” or “Investing expert expects markets to be higher by year-end.” All it will do is fuel whatever fear or exultation you are feeling about the market, and can cause you to fret over what course of action you should take. Trying to play games by timing when to buy and sell something is futile – you will not pick the peak or the trough and you’ll likely end up selling at the wrong time and missing out on market rebounds. Markets are unpredictable. Anything can happen. Save yourself the hassle and disappointment and just buy when you have the money and sell when you need it.


3. Zoom out


Look at the big picture. You likely have long-term financial goals and won’t need to withdraw all of your investments tomorrow, or even next year. As you will see from long-term stock market charts - the U.S. market chart is below - the market always recovers and in time, you’ll get back to where you were before the downturn. So far, a recovery has always materialized, although sometimes it takes a few years so you need patience and time on your side. (This is why investing isn’t for short-term goals.) Remember too that if you’ve been in the market for a while, you’ve probably made some money – see a pullback as simply a giving back of some of your gains, instead of viewing it as a loss. And anyway, why worry about a paper loss? You only lose if you sell.


If after applying these three tips you still feel nervous, upset or worried, maybe you need to revisit your risk tolerance. Before investing, you may have filled out a risk tolerance questionnaire. One of those questions was probably something like “How would you feel if your investments declined by 20%?” From a distance and on paper you might have felt totally fine about that, but now that it’s actually happening, you feel differently. That’s ok – adjust your asset allocation, perhaps adding more bonds or even buying a GIC (now that rates are somewhat decent). You may be sacrificing long-term performance, but feeling good is important too.


Coming to terms with market volatility is an important part of investing, especially if you are a do-it-yourself investor. Detaching emotionally, not speculating and looking at the bigger picture will help you find some peace when your investments are falling in value, and allow you to focus on more important and fruitful things.




 

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