Special thanks to AC Contributor Aaron Smith for his piece about “Five Ways to Lower Stock Market Related Stress.” He led with the usual litany of things financial professionals will tell you; “don’t follow markets too closely,” “don’t listen to the pundits,” “think long term;” and that’s really nice and helpful. But I would take almost the exact opposite approach to investing in the stock market. As a participant in virtually anything market related you need to turn up the aggression. Find out as much as you can, check back on your investments regularly, and while you don’t have to keep CNBC turned on all day, you do definitely need to keep up with big changes in the markets, big changes in your investments, and there is no longer any time for waiting; you need to be able to be informed up to a point, have good perception about stuff going on that’s fishy, and be ready to pull the trigger and sell (even for a loss) when the end-game could end up being zero. We live in too connected a world with far too much information (good and bad) to take a back seat to what’s going on and think that just because you work for, say, General Motors or Lehman Brothers or Enron that the value of all your savings, contributions, and matching amounts cannot go to zero.
Keep the Stress On: Listening to the Pundits/Listening to Your Gut: I had a very similar situation happen to me where I may have been better off not listening to the pundits but boy was I glad that I listened to my gut. I was watching Fast Money on CNBC and Karen Finerman, one of the regular co-hosts of that show, mentioned a stock I’d had my eye on; Washington Mutual around the end of September 2008. She thought it was a good buy as it had been pushed down from $45 just a few years before and was now trading around $4/a share. I pulled the trigger on September 22, 2008 and bought up 200 shares at $4. Not a huge investment but I thought what the heck? Just a few days later, on September 25, 2008 the stock was hovering just over $2 a share. I had just heard a financial professional a couple days before give this stock the green light; still, I thought there had to be something going on. I sold those same 200 shares at $2.02 and the very next day the value of Washington Mutual was $.18. Now, if I’d have had thousands of dollars invested in this stock, taking a hit like $45 to $4 would have been hard. But taking the even greater hit of $45 to $.18 would have been unbearable. Two years later Washington Mutual trades around $.16 a share. So while listening to these talking heads (as well as my own independent research) was what got me into trouble in the first place, I’d be sitting here two years later with this worthless stock if I hadn’t acted.
Keep the Stress On: Conclusion: Investing isn’t for everyone. If you are going to be trading stocks or investing in your company’s stock then the least you can do for yourself is to keep up with what’s going on. For your company’s stock anyway. If you want to take an ‘under-the-mattress’ approach to investing there are plenty of actively managed mutual funds you can invest in where you pay someone else to mind your money. Or there are bonds, CD’s, and other fixed annuities. However if you are going to include stocks in your diversified investment portfolio then you need to definitely keep up with what is going on, be informed and unafraid to make a move and you need to keep the stress on!