market anxiety

Probabilities Versus Possibilities
photo shows a goldfish with a shark fin strapped to it swimming with the fin above water

Our energy is a finite resource. Sure, we consume food and we sleep to replenish our bodies, but they too don’t last forever. The basic formula for kinetic energy requires velocity—movement. But we don’t always direct our movement in the most skillful ways.

For instance, we humans are great at focusing on low-probability events. After all, these are the events that catch headlines: “if it bleeds, it leads” the saying goes. (I mean, how do you think the world ended up with Shark Week?)

We wrote recently about bear attacks, among all things, and now we’re thinking more deeply about these ideas. What if instead of placing so much energy into unlikely (albeit scary) events, we limit our focus a little: what if we focused more instead on what’s probable?

In the markets, we hope to see at least the typical patterns of probability. Some ups and downs every year, a general trajectory of more up than down across almost any stretch of five or more years. No guarantees. But these are the general probabilities of the long-term proposition.

We don’t lock into losses by treating drops like the end of the world. Of course fatal shark attacks do happen, they are real, but we don’t stay out of the pool because one time somebody got eaten out in the open sea. That just wouldn’t make a ton of sense, huh?

The possibilities are endless, and they could consume us until our last breath. Let’s direct more energy toward what’s probable.

Clients, want to discuss what’s probable and suitable for your situation? Reach out anytime.

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Play the audio version of this post below:

Probabilities Versus Possibilities – 228Main.com Presents: The Best of Leibman Financial Services

This text is available at https://www.228Main.com/.

A Tale of Two Theories

© Can Stock Photo Inc. / ambro

Psychologists have a strategy to help cope with anxiety called the “dual model strategy.” It works like this:

You have a concern about some imminent disaster, which you believe is the source of many troubles for you. This is “Theory A.”

The alternative is that your concerns may actually be unfounded, but your fears themselves are creating your troubles instead. This is “Theory B.”

When it comes to investing, Theory A probably sounds like this: “The problem is that the economy will crash and I will lose money.” Theory B would then read: “The problem is that I worry that the economy will crash.”

If Theory A is correct, the proper plan is to pull your investments out of the market and put your money someplace safe. But there are two problems. First, we’ll never know if Theory A is correct until it is too late. Second, the economy and the markets have eventually recovered from every previous downturn. If you act on Theory A, there’s a good chance you may end up hurting yourself by acting at the wrong time. But Theory B—the idea that your worries are the real problem—is something that we can always work on.

The question is, how do you cope with your anxieties about the market? Perspective is important. Most of us are in this for the long haul, and are counting on our investment basket to provide for us for years and decades to come. Watching the market slide may be nerve wracking—but if you look back over the years, the speed bumps are barely noticeable.

Even so, it is easier to say “stick with the long term plan” than it is to live through short term bumps. There are some practical steps you can take to help cope with your market anxieties, too. Make sure you keep a cash reserve for emergencies: your investment portfolio is not a replacement for money in the bank. Also, as you reach the point in your life when you start to rely on investment income, it’s important to understand where your income is coming from. Even if you fear a downturn in the markets, it may not necessarily affect the ability of your income investments to generate cashflow for you to live on.

The key in all of this is to come up with an investment strategy that you’re comfortable with. If you continually change tactics every time you get nervous you may hurt yourself financially. If you need help coming to terms with your investment worries, please call or email us to talk them out.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. No strategy assures success or protects against loss.