I remember that gripping fear.
The fear squeezing my stomach so incredibly tight. Churning and churning.
Is this the right move?
Could I be wrong again?
The fear causing me to hesitate. My mind swirling with the possibilities and the consequences.
Could this be an amazing opportunity? But… what if I lose money? Am I buying at the top or is this a relative bottom?
Maybe like me you’ve had these conflicting feelings.
Maybe like me you’ve made some mistakes along the way.
Maybe like me you’ve felt confused and you’re wondering what to do next.
Maybe like me --- you have Financial PTSD.
I’m not afraid to admit that I have many seeds of doubt. These seeds of doubt have been planted in the multiple financial famines of the last two decades. By going through financial crisis of the tech crash (2001 to 2003) and then the financial crisis of the great recession (2007 to 2009) and now our most recent flash crash due to Covid.
In each moment and each time, I can go back and point to some really great things I did as well as a number of decisions that I’ve lived to regret.
As I do some self-reflection, I find myself scarred by these events.
I even start seeing myself in these past moments and there’s this pain that haunts me.
The pain of being wrong.
The nagging self doubt causing me to lose sleep at times. That nagging self doubt causing me to question my judgement.
For example, I’ve been taught since the beginning of my career the vital importance of having international stocks as part of your asset allocation. Most models over the last two decades have allocated 10% up as much as 20% should be dedicated to international investments.
Yet, as we look at the data from the last decade, you’ll see how badly international equities have been beaten by domestic equities. For example, look at international stock indices like the MSCI EAFE and FTSE Emerging Markets have compared to the S&P 500.
According to Morningstar.com as of 10/9/20 over the last 10 years, EAFE has averaged an annual 4.43%. FTSE EM has averaged a paltry average 2.26%, and the S&P 500 has averaged a whopping annual 13.69% return.
Imagine that --- every year over 10 years, you would have gotten nearly a 6x return in the S&P 500 compared to emerging markets.
Will this trend continue for the next 10 years?
Alternatively----- could it flip-flop and now emerging markets lead the way for 10 years?
Do clients even care about international stocks?
Would they be upset if they would have done better in international stocks if they did better?
Are they even keeping an eye on it?
This mind flipping and flopping become very frustrating and quite the quandary for me personally.
What about you?
Could you be experiencing your own form of financial PTSD?
I’m guessing there’s many folks reading this who may have financial PTSD with stocks in general.
Maybe you get heartburn at the sight of the market being so high. Maybe you doubt that stocks could climb higher. Maybe you are afraid of losing money.
You think of past experiences where you’ve lost money.
You think of past experiences where you’ve made poor decisions with money.
You think of past experiences where you’ve bought high and sold low.
Maybe you’ve even had hired someone who made these mistakes with your money.
Perhaps, those experiences are causing you mental struggles and maybe even physical pain.
Suddenly, you are locked in a state of indecision. You’re sitting with all this money on the sidelines and it’s not earning you anything…. But at least it’s “safe”.
My friends, you are not alone.
I’m human. Obviously, I struggle with my own past pains as well.
However, what I do know is that having a system and a plan helps.
What are your plans? How are you going to keep on track?
I'd love to hear what they are! Shoot me an email at firstname.lastname@example.org!
Material discussed is meant to provide general information and it is not to be construed as specific investment, tax, or legal advice. Individual needs vary & require consideration of your unique objectives & financial situation. Please consult with your accountant or tax advisor for specific guidance.