Talk to Your Heart Because Your Head’s Not Listening

The Real Cost of a Bear Market

By David Geller   |   February 14, 2018

In case you’ve forgotten, today is Valentine’s Day.

But we’ll get to that in a minute.

If you have a properly designed globally diversified portfolio, there is often little long-term financial costs to market declines. Although they’re scary in the moment, they’re a part of life. Here are the historical numbers if you’d like a refresher:

  • Market corrections (a decline of 10% or more) occur about once a year.
  • Bear markets (a decline of 20% or more) occur on average roughly every 3-1/2 years and last about 15 months with a peak-to-trough average decline of 32%.

But that’s all old news. We’ve said it—and you’ve heard it—hundreds, if not thousands of times. You probably have your finger poised to close the browser, nodding to yourself, thinking, “I get it. As long as I don’t panic and sell during the dip, no problem.” Right?

Well, not exactly. Because your HEART doesn’t care about numbers, or peak-to-trough averages. All this reassuring historical data speaks to our HEAD. And your brain might not be listening right now.

You might be suffering from “Stock Market Syndrome.” No, it’s not a real diagnosis, but it might describe how you’re reacting to recent market’s gyrations. Instead of taking in and taking comfort from historical data, you instead might be hearing a lot of noise. Or perhaps the information goes in one ear and out the other.

Therapist John Tsilimparis explains “Stock Market Syndrome” and gives some helpful tips in this video (with an ad before it, sigh).

Maybe you started checking the market just once a day, but now you’re checking obsessively several times a day. You look at your falling portfolio balance, and nagging worry surfaces. How low will the markets drop? Will this drop affect my retirement plans?

You catch yourself thinking these negative thoughts and then, if you’re like most people, you stuff these thoughts back down and firmly tell yourself that’s just your emotions talking.

But there’s no “just” to it. If your emotions are talking, your brain’s probably not listening.

There are any number of behavioral biases at work here:

  • The availability heuristic: Our brains assign greater importance to information we hear repeatedly, like market data scrolling endlessly across the TV’s banner.
  • The bandwagon effect: Your golf buddies are worried, the market pullback is on every news channel, and even the anchor in the video said she was nervous. That makes it more likely you’ll worry, too.
  • Salience: It’s easy to recognize market dips from numbers and charts, but harder to evaluate the strength of the economy or the companies.

Unchecked, that nagging worry can grow into full-blown anxiety that robs us of time, our most precious resource. We focus more of our attention on the market and less on our life.

  • More on the Dow; less on our spouse, children and friends.
  • More on our falling portfolio; less on doing the things we love.
  • More on the chatter from financial talking heads; less on what matters most.

And here’s the heartbreak: Our portfolios will recover, but we can’t recover the lost time we spent obsessing about something that, in the end, doesn’t matter at all.

That time we could spend with family and friends, doing what we love, and making a difference, is lost forever. That’s no way to celebrate Valentine’s Day.

So how do you stay calm and live your life to the fullest?

Acknowledge that market corrections are an emotional issue. You can’t logic your way out of an emotional problem. No amount of data about market recoveries, lengths of bear markets, rising dividend yields, or other market facts will provide lasting relief to your panic, obsessive behavior, or nagging worry. Why?

The emotional part of our brain doesn’t speak math or logic.

You have to reach your heart before your head can impose logic again. But how?

  1. Take evasive maneuvers, Mr. Sulu. Avoid things that will trigger your anxiety. Does checking the markets on your phone raise your anxiety? Turn it off. Do you have a friend who is constantly obsessing about the markets? Avoid him. Does checking your portfolio balances drive you crazy? Have your spouse change your password.
  2. Build up your immunity to triggers. Think about what will help you feel more peaceful and centered. JOYN’s developed a number of exercises to help you manage your emotions in turbulent times.
  3. Walk it off. Science shows that exercise helps burn off stress and anxiety, as does the Japanese art of forest bathing.
  4. Try meditation. This once-scorned mindfulness practice helps many people stay centered. Don’t know how? Insight Timer and Headspace are two popular phone apps that can get you started.

For me, family game night is a wonderful way to step away from work and drown out market noise. Yahtzee!®

Finally, seek help when you need it. Your JOYN advisor can help you reframe that incessant chattering in your head. Our Alternate Story and Illusion of Control conversations are designed to help you see the world differently, and to move from a fear to confidence.

Life is short. Don’t let market dips distract you from what matters most in life. On Valentine’s Day, celebrate with the ones you love. And maybe pick up a bouquet of roses and some chocolate, too.

David Geller

About the Author

CEO David Geller co-founded the firm in 1991 and led the creation of Behavioral Wealth Management. Recognized on numerous prestigious "top financial advisor" lists, David is an in-demand speaker for professional groups and JOYN workshops. His writings have appeared in The New York Times, The Wall Street Journal and The Huffington Post.

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