On September 20th, CNBC reported that “nearly 1 in 5 consumers have closed an investing, trading or brokerage account over the past 12 months.” 

Of those closing accounts the largest groups, by generation, were millennial and Gen Z investors.

Let that sink in for a second.

Naturally, as the stock market has entered a sustained downtrend, it makes sense that investors would pull out of their investments. So maybe this isn’t surprising.  Fear, panic, and financial insecurity are natural, understandable, and in some cases necessary responses to losing money.

But it’s one thing to sell, take your cash, and run. It’s an entirely different, and deeply concerning phenomenon, to see a large population of new investors closing their investing accounts entirely.

As a company focused on supporting the long-term investing journeys of these new generations, the thought of a large population completely cutting ties with the markets sounds a terrifying alarm. 

What caused them to go as far as to close their brokerage accounts? Have they completely lost faith? Will they ever come back?  

Losing investors forever is a scary and saddening thought. We recognize that we don’t know each person’s story or financial situation, so we hope those who have stopped investing are able to use their money where it’s most needed right now. And we hope they return. 

Investing is a privilege and we should treat it as such. At Daizy, this further motivates us to continue on our mission of making investing information easier to engage with, investing data more transparent, and the investing experience more human. We hope to win those people back who have sworn off investing due to frustration, limited access to quality information, and/or lack of guidance and support.

For those of us who are still trying to figure out what’s going on in the market and what to do with our money, for those of us who are frustrated, feeling the pain of loss, and unsure of how to move forward, today we want to pose the question: 

How can we stay the course, mentally, emotionally, and monetarily, in a volatile, panic-ridden, and unchartered market?

We have some thoughts.

#1 Be more rational Reframe your emotions

The advice constantly purported during a downturn is effectively “turn off your emotions, be more rational.”

It’s not necessarily wrong, and if you want to end up with the emotional profile of the 75-year-old hedge fund robots that beat investors over the head with this sentiment, be our guest. It’s just not always helpful.

We have to acknowledge our emotions – we’re human.

Since we’ve discussed this thoroughly in other blog posts, we won’t belabor the point too much today. The important thing to note is that, if left to their own devices, our emotions can become our worst enemies as investors. But ignoring them completely is not an option, for most people.

Rather than giving into fear, stress, panic, and anxiety, we can use them as indicators that something deeply important is happening. Therefore, we should make careful, deliberate decisions instead of hasty, rash ones.

Learning to name and reframe emotions helps us make better decisions. And often the best solution to better decision-making is simply giving yourself more time. 

#2 Short the market Reframe your perspective

Yes, there’s money to be made when the market is falling. You can buy puts, you can buy inverse funds, you can buy futures.

But historically, the average bear market in the US lasts less than 10 months.

The problem with betting on the market’s downfall is that it has only ever worked in the short term. And as we all know, timing the market is complicated and futile.

If your goal is to become a better long-term investor, is it more helpful to lock your mindset into the constant cycle of “how do I make money in the short term?”, or to take a step back, reevaluate, and work to future-proof your investment strategy more broadly?

By definition, the latter seems more helpful.

When we say “reframe your perspective”, it doesn’t mean ignore the current situation and tell yourself it’s all going to be okay in the long run. That isn’t always the most helpful process either.

What we do mean is, take this time to build your mental and emotional fortitude, take in new sources of information that get buried during times of prosperity, find trusted advisors that have investing experience and wisdom to learn from.

There are a lot of new paradigms in the financial world, yes, but human behavior largely stays the same. We’re all now learning that we might not be intellectually superior to those who came before us, and there’s a lot to learn when we’re willing to reframe our perspectives.

#3 Take less risk Reframe your knowledge

In bear markets, a lot of “told you so” voices crawl out of the woodwork and start making noise. These voices bash investors who are losing money for taking unintelligent and unnecessary risks, and shame people for not seeing the bubble before it bursts.

And we all know how helpful shame and guilt are (see: completely counterproductive) for self-improvement.

So instead of letting those voices completely derail you and blaming your risk appetite, use the opportunity to reframe your knowledge.

Maybe it’s taking the time to learn about new asset classes like fixed income, commodities, or real estate. Maybe it’s considering broader diversification. Maybe it’s learning more about the economy and monetary systems.

Yes maybe once you take some time to reframe your knowledge, you’ll end up de-risking your portfolio. But you’ll be re-evaluating your risk based on a healthy motivation rather than the fear or shame of losing money. This will help you build a better relationship with risk, an invaluable trait of a long-term investor.

Staying invested

At Daizy, we believe it is of the utmost importance to stay invested in your financial health and future, even if it’s not with your money.

We completely empathize and don’t fault anyone for doing what you feel is best with your money according to your unique financial situation. However, we are here to support and encourage you to not turn your back on investing. We’re all in this together and we know that we can all come out the other side more confident and competent investors.

Leave a Reply