How To Make Money Less Stressful

Wealth is one of the most personal and intimate aspects of your life. For that reason, it can be tough watching your money move up and down in response to market fluctuations. But if you find yourself watching daily changes or feeling moved to make quick decisions based on recent headlines, it may be time to pause and speak to a financial professional.  

Your portfolio should be built for long-term performance based on your future goals. Let’s explore common behavioral biases that often lead to stress around your finances and what you should focus on instead.

Common Emotional and Behavioral Biases

You might be surprised at just how much influence investor sentiment has over the markets. On a large scale, mass concern over global events (like the COVID-19 pandemic) can cause millions of investors to panic sell – or panic buy – and change the trajectory of an index (like the S&P 500) in a single day.  

But on an individual level, your reactions or natural inclinations can impact the long-term success of your portfolio based on short-term or immediate concerns (that typically resolve themselves over time).

These reactions come from what are called emotional or behavioral biases, and there are a few common ones every investor should be aware of:  

Loss aversion: Some people have a greater emotional reaction to losing money than gaining it. If that’s the case, you may have loss aversion. People with this type of bias may try to avoid the possibility of losses altogether by making their portfolios ultra-conservative – or swing to the other side of the spectrum and shoot for bigger wins (with more risk) that can compensate for potential losses.

Confirmation bias: Though it’s often done unconsciously, we tend to seek out information or sources that will confirm the beliefs we already have and avoid those who may challenge our viewpoints.  

Hindsight bias: If you’ve experienced success investing in the past, you may be inclined to take credit for predicting something that could not have been easily predicted. This may create a false sense of confidence in your ability to anticipate future market movements.  

Familiarity bias: Investors will sometimes be more comfortable sticking to what they know, meaning they’ll invest in companies they’re familiar with – even if there’s a better option available.  

Understanding what biases influence your decision-making can help you make more conscious, data-driven decisions about your investments (and recognize when a bias may be at play).

The Case for Staying Invested

Just remember, through World Wars, assassinations, Y2K, presidential elections, a housing crisis and more, the markets have historically always recovered in time and, ultimately, continued trending upwards. It may help to think of it this way: the wider the timeline you give your investments, the smoother the trajectory.

Past market data shows that if an investor was to miss just 10 of the best-performing days in the S&P 500 over the past 20 years, their returns would drop from 9.7% (when staying fully invested) to nearly half – 5.5%. What’s even more interesting is that seven of those 10 best-performing days happened within just two weeks of the 10 worst days.¹

It may help to see this played out with an example.²

Say you had just invested in an ETF that tracks the S&P 500 when the index hit the lowest point of the 2008 financial crisis (around 676 on March 9, 2009). You stayed invested through the volatility, and saw the markets rise gradually over the next decade. Then again, you saw the value of your investments fall during the COVID-19 market crash in March 2020, when the S&P 500 dropped to around 2,237. Still, you stayed invested. After several years of market recovery, you finally decided to sell in September 2024, when the index was around 5,762.  

Through two major market downturns, the S&P 500 grew more than 8.5x over the span of 15 years, despite such drastic and sudden downturns (which as you likely remember, felt scary and irreparable at the time for many investors).

Imagine if you had decided to exit the market during these times of turmoil rather than remain in? Not only is this a good argument for staying invested through market volatility, but it also demonstrates just how quickly the markets have historically recovered from serious downturns.

Remember: Time in the Markets Beats Timing the Markets

If you’re feeling stressed about what you’re seeing on television or concerned over the fluctuations of your portfolio, it’s okay to take a step back and tune out the noise. With a long-term investment strategy, your portfolio doesn’t need to be watched day in and day out – rather, your advisor can check in as needed to ensure it’s still aligned with your risk tolerance and future goals.

At Conway Wealth, we guide you to live beyond the numbers, prioritizing not just financial returns but what truly matters to you and your family. If you’d like to speak to someone about your portfolio and financial goals, don’t hesitate to contact us today.

Investment advisory and financial planning services offered through Summit Financial, LLC, an SEC Registered Investment Adviser, doing business as Conway Wealth Group (4 Campus Drive, Parsippany NJ 07054. Tel. 973-285-3600). 7094994.1

1. “S&P 500 Index – 90 Year Historical Chart,” Macrotrends. (October 1, 2024). This shows how returns would have been affected by missing the market’s 10 best performing days over the 20-year period from January 2004 to December 2023. The returns do not include the impact of fees, expenses or dividend reinvestment and are not representative of actual investor results.
2. The S&P 500 Index is an unmanaged index that is generally considered representative of the U.S. stock market. Past performance is no guarantee of future results. It is not possible to invest directly in an index. The information provided is for illustrative purposes only and is not meant to represent the performance of any particular investment. Staying invested does not necessarily assure a profit and does not protect against loss in declining markets. All investing involves risk including the loss of your entire principal.