I visited with a gentleman recently who had completely pulled out of the market during recent times of volatility. He moved all of his money to cash without the advice of a professional. I was interested in what his money would have done, had he simply left it invested, as it was. After making the appropriate calculations, I saw from the moment he pulled out, to the day I did my recalculates, that his account balance could have been twenty thousand dollars higher, than it was the day when he pulled it out. He had missed out on a market bounce. This gentleman was suffering from Peniaphobia.
What is Peniaphobia?
Peniaphobia comes from Greek word ‘penia’ which means ‘poverty’. So, Peniaphobia is the fear of poverty. When I asked about the twenty thousand that he could have recaptured from his loss, he simply said, ‘I didn’t want to lose any more’. His fear of loss was greater than the reward of twenty-thousand dollars.
Granted there is no guarantee for the future. No one can make that statement. In fact, I am bound through security regulations to never use words like ‘guarantees’ or make predictions about the future; yet, here’s the thing. I have lived a long life and I am fascinated with history; and my life and history has shown me through experience, that we have always recovered through adversity. Some might say that this time it’s different; yet, each time in the past, at that point in time, it was been different, as well.
The treatment list for peniaphobia typically includes only two things - anti-anxiety medication and behavior therapy. Well, I can’t provide you with an over-the-counter medication; but perhaps I could suggest the following behavior therapy:
Try to change your inner-physiology. Try to turn away from negative news, negative posts and negative people. I have known some individuals during this pandemic who have become 24-hour news junkies. Don’t turn off from the world; but an hour of news each day should give you what you really need for information. With the time you’ve recaptured - go out for a walk, call a friend or watch an uplifting movie.
Don’t check on your account balances each day. Depending on the day, newscasters have reported that “Today has been the worst day in the market since…blah, blah, blah; followed by the next day reporting that the market has had it’s best day in the market since…blah, blah, blah. It’s a little overwhelming, isn’t it?
You should only consider changing the allocation of your investments if your goals and/or if your time horizon has changed. If you created a well-diversified portfolio before the financial crisis, that portfolio should have been created to weather possible unknowns. On the other hand, if you created a portfolio that was expected to reward you with aggressive returns only during positive markets, that portfolio could be rather ugly today.
One thing that will come from 2020 is a renewed understanding to reasonable approaches to thoughtful realistic long-term investing.
If you need to add a levelheaded thoughtful approach to your financial life, perhaps it’s time to schedule your financialoscopy.
