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Dealing with Stock Market Losses

All eyes were on me. My heart was racing.

But as I took a deep breath, my demeanor was calm. I had mentally prepared for this moment all offseason long.

It was the first game of our flag football season. We were the new team of the league, eager to win and prove ourselves.

As I took my deep breath, I went through my progressions. Option #1 wasn’t open, and neither was #2. Then the pressure came and I was forced out of the pocket. The referee counted out loud until he reached 6. Man, that was a lot faster than I thought.

Just like that, our season started with a sack. I kept my cool and pressed on. 2nd down had one of our guys wide open. I made the throw, a little low, and he dropped it.

Our 3rd down play gained some yardage but not enough for the first down. We punted, and I went back to the sidelines.

It was quite a terrible way to start the season. Couple that with our opponent scoring on their first drive, and we were in a precarious situation.

No matter. I was mentally prepared for this, had rehearsed losing situations over and over again. I would keep my cool, not panic, and continue to scheme and find ways to beat the other team.

By the second drive, I already knew what the defense was trying to do against me. They had a zone on one side with a single man island on the other, so I called a play to counter this perfectly.

The route was run great, the man was open, and my throw was good. At the last second, my receiver tripped, and the play was ruined. Our team found ourselves in another unsuccessful drive, and that’s when things really started to unravel.

The seemingly insurmountable score and lack of time to make up the difference started to affect my gameplay, no matter how calm and rational I thought I was. I really started to miss some throws, make poor decisions, until the game ended in a mercy rule.

This humbling experience got me to thinking about how many investors out there probably feel the same way.

stock market losses

Our whole lives, the media tells us we will be rich, famous, and happy. The investment industry exploits people’s hopes, showing commercials with smiling actors who seem to never have to worry about stock market losses.

We spend our waking hours dutifully slaving away for the man, hoping to be rewarded someday with happiness, leisure, and luxury.

We’re told that the stock market is the place that will give us these things.

We’re told that these pleasures are reserved for retirement.

We’re told to keep our hopes high and our heads down low.

Surely the powers that be will reward our faithfulness and sacrifice with bountiful stock market returns, consistent and growing dividends, and wealth beyond our imagination.

Yet the reality of the stock market is much different. 

Like life, it seems that everyone else around us is having fun. We get the fear of missing out on the best stocks, wonder why there are stark losses in our portfolio while the rest of mankind seems to be dining on caviar and the finest wine.

This makes us angry.

Anger clouds judgement, and can lead to poor financial decisions.

Just as football games easily snowball, so can your finances. Things can snowball positively or negatively. Compound interest accumulates wealth but also destroys it (think credit cards).

The reality is that we can mentally prepare for stock market losses as much as we want, but it will never replace the experience of actually feeling it.

A reputation takes 20 years to build but just 5 minutes to ruin. The same thing can happen to your finances. Just ask guys like James Altucher, who have built millions just to lose it all.

I could pontificate all day about the things you should do to minimize the negative consequences of stock market losses. But it could all be singing to the choir, in the same token that you can tell someone not to ruin their reputation after building it for so long yet they’ll still do it.

If everything in life, and finances are a big part of it, were so easily controlled by logic we’d all be boring robots with no interesting stories to tell our children.

I can’t pretend to know the answer to keep you from making poor, emotionally charged decisions. I can’t pretend to know how much negativity you associate with your stock market performance, how far behind you feel, or how much you hate seeing stock market losses in your portfolio.

I can’t know because I’m not you, but I can empathize with you. And just because I personally have clarity during stock market losses doesn’t mean that all of you are like that.

So these are some of the mindset shifts I’ve made to endure stock market losses. Maybe they will help you, or maybe life isn’t done smacking you around a bit. I don’t know.

But I do know that money is just a game. Just like football, just like most everything else in life. Remember that no one really cares how you play this game other than yourself.

It’s ok to expect greatness from yourself, but it’s also ok to accept failure.

Stock Market Losses Reminders

  1. The best gains come after spectacular losses
  2. Stupidity may win short term, but wisdom wins long term
  3. How much you invest is way more significant than performance
  4. Buy low, sell high means constantly buying into pessimism
  5. One bad investment won’t kill you if you are diversified