The Blatt Watch by Peter Blatt: Compartmentalizing the Risk and Worry of Your Investments

From the desk of Peter Blatt

February 27, 2013

We’re constantly bombarded with studies, articles, theories, and ideas on how to reduce stress at work or home, many of which are repetitive. But here’s a new strategy: how about intentionally scheduling a 30-minute period to “worry” about all the things you need to worry about, daily?

The background of the theory comes from a July 2011 study published in the Journal of Psychotherapy and Psychosomatics (a title that, by the way, suggests the authors must at least remotely know what they’re talking about) in which researchers found that subjects who set aside a half-hour a day to dwell on their problems in an effort to conjure up solutions, in addition to deliberately not worrying about anything at any other time throughout the day, we’re better able to cope with those problems than the control subjects.

The studies ultimately suggests that yes, it is good to worry, but in short doses and in a scrupulous, focused manner.

Now, assuming we agree with the researcher’s finding, the question begs: if following this type of “worry later” method works in more generalized circumstance, can we apply the technique to our work as investors? I think the answer is a resounding YES…but only if you have the tools and the initiative to follow the model.

The caveat is that most people don’t have those psychological “tools” – patience, a long-term mindset, an ability to ignore the news, eliminate emotion for investing decisions, and stomach the inevitable upsets. Psychologists universally agree that dealing with stress and worry requires the proper mindset and techniques, but the primitive predispositions that act as barriers to overcoming our defense mechanisms can often defeat us.

For example, that negative, critical voice in your head that screams, Don’t do it! could alienate you from the potential for a positive relationship to develop or stop you from directly solving an issue at hand. Another example is the “fight or flight” instinct that can inadvertently force you to run away from something you could have faced and overcome.

These same defensive mechanisms reduce your ability to logically and diligently invest when things are going poorly and when things are going well. The two terms fear and greed come to mind.

So, do most investors fail to rationally and diligently invest in a consistent and proper manner? You bet. And if most people are overall poor self-managed investors, and we know studies show that scheduling time to focus and solve your concerns, issues, and worries helps us to better cope and find solutions to those problems quicker, why don’t we combine the best of both worlds?

Here’s my suggestion for the week: set some time aside in which you’ll take a serious and considerate look at your investments. How much time or when it’s scheduled is up to you, but I would say a minimum of a half-hour a month to start. My sincerest hope is that using this time wisely will help you to make more informed and therefore better decisions regarding your portfolio now or when the time comes.

This is the back drop for financial planning. If you’re not managing your own account and instead you work with a planner, schedule this time with him or her.

If you don’t manage your money yourself and don’t have a dedicated financial planner or money manager, give me a call and we’ll schedule a free 30-minute consultation. We’ll even have two or three…whatever it takes to help you get comfortable.

Learn the tools. Eliminate the emotion and irrationality. And call me if you need me.

Until next time,