(Orion) As we buckle-up for another ride on the election merry-go-round, research indicates that a vast majority of American’s are feeling anxious and depressed, or they’re feeling “checked-out”1 2. On one hand, those are reasonable reactions to the state of things and the questions around what happens next: in the market, with regard to geopolitical turmoil, humanitarian crises, or one’s sense of security. On the other hand, those emotional reactions decimate our ability to make good-decisions in suboptimal situations: wherever you fall on the political spectrum, you’re subject to the universal reality that high stress levels lower cognitive functioning, make us more reactive than proactive, and more likely to jumping to conclusions on partial evidence3 4 5. Not exactly the ideal mental-state for an investor seeking to be savvy and wise in their decision-making. Even if you can opt out of paying attention to the election, you can’t opt out of its impact on your security and future, so what should we do?
First, let’s parse out this stress by putting in 3D. Imagine the facets of this pyramid are labelled Past, Present, and Future. Elections can provoke stress on all three dimensions: the weight of the past, coming to bear on the present, the events of which portending different futures. This is all true, so, first, let’s acknowledge that. Now let’s consider which facet you’re able to act on. If we’re unable to change the past, or predict the future with 100% accuracy, we’re left with managing the present.
If you’re looking to keep your head, as we head into election seasons, acknowledge the weight of the past, and that current events impact the future, then take action in the present.
DON’T:
- Let election stress take the wheel in driving your financial decisions: the market historically yields positive results over time
- Become overly focused on short-term market movements that won’t serve long term
- Ruminate without limitation: rumination is focus on a problem rather than a solution
- Fall victim to action bias, thinking that if you panic and do more, you’ll have more impact
- Cross your line between ‘informed’ and ‘overwhelmed’: draw it for yourself in accordance with your values, and hold it
DO:
- Pause and evaluate your media consumption: alarmist headlines sell, social media news outlets are riddles with misinformation, avoid chronic exposure to the 24-hour election news cycle
- Consider only reading news in the morning, for a set period of time, and not before bed, to protect your sleep
- Stay invested, diversified, and accept that volatility comes as a result of uncertainty, and that come in tides that will move out before they move back in
- Let go of subconscious belief you can predict the future: making decisions around your financial security based on hunches about political candidates could cost you
- Focus on the ways you can optimize your wellbeing: focus on getting enough sleep, movement, recreation, solitude, socializing, and good food
- Bring mindfulness to the moments and actions in which you can deliberately support causes you believe in, and recognize you can impact those and nothing more
Regret can’t change the past anymore than anxiety can change the future, but by managing the present, we optimize the path forward.
Contribution from Dr. Naomi Win, Behavioral Finance Analyst, Orion
