Return On Stress
Episode description
September.
Was.
Ugly.
The S&P 500 was down more than 9% in the month of September alone.
Markets were dropping, and investors were stressing.
When it comes to investing, we have a lot of metrics and measurements to analyze investments. We typically like to express these measurements in ratios – allowing us to compare one particular figure with another. Think return-on-investment or price-to-earnings ratios. Here’s a ratio you won’t find in your financial textbook: return on stress.
As you might imagine, these markets have led to skyrocketing levels of stress for investors. Anxiety is peaking, as uncertainty seems to be at an all-time high. Yet, let me remind you that return-on-stress is always zero. Our anxiousness, our fears, and our stress do not add an ounce to our investment returns. It’s these very emotions that typically get us in trouble – I can’t begin to describe how much financial damage has been caused by poor investor behavior.
Well, I was blessed with the opportunity to deliver the message at my church this last Sunday, and I think there were a few tidbits from this sermon that are applicable to investors and our discussion today. In my intro, I spoke about what fear and faith have in common, as they both deal with an undetermined future (h/t John Gordon). We either choose to fear what the future has in store for us (negative anticipation), or we choose hope/faith, believing that goodness lies ahead (positive anticipation). I went on to explain how faith is often misunderstood, and how our experiences can sometimes derail our faith. I explained that faith is not having clarity in the process, but rather having clarity in the outcome.
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