Anxiety Files

Simple and powerful techniques for coping with anxiety and worry.

Robert L. Leahy, Ph.D., is the author of Anxiety Free and The Worry Cure. He is Clinical Professor of Psychology in Psychiatry at Weill-Cornell Medical School and Director of the American Institute for Cognitive Therapy. See full bio

October 27, 2008, Anxiety

Overcoming Post-Traumatic Investor Disorder

The most terrifying financial trauma or the biggest opportunity?

As I indicated in my previous post on Post-Traumatic Investor Disorder you have been so badly burned by your recent losses in the stock market that you are traumatized. You have a sense of impending doom, terrible surprises that can happen at any time, loss of trust in investment and guilt over your own actions. You blame others, you feel that the world is not what you thought it would be, and you want to avoid all information about the market and any information in your monthly statements. As I indicated, this makes it possible for other investors to buy all the stocks that have been dumped at cheap prices. Warren Buffet and the other pros may look at the current debacle as the biggest opportunity that they have seen. It may also be the most terrifying financial trauma that you have experienced and, so, you are reluctant to move forward.

What can you do?

First, you can realize that it is not in your long-term interest to be traumatized about savings and investing. You may have other opportunities in the future-and your future investment strategy is important to you. Retreating may feel safe, but you may end up putting your money into notes that won't keep up with inflation. If you keep looking in the rear-view mirror, you will never move forward.

Second, you can validate yourself. Treat yourself kindly. Of course you're upset and angry. Of course you feel anxious about the future. You are human. You have a right to these feelings. You are not alone.

Third, even if what has happened feels terrible and is, in some ways, quite unfair, it is what it is. It is the GIVEN. One way you can think about this is that you ultimately have a choice between protesting about what has happened or accepting it as the current reality. By accepting your losses as the GIVEN AT THE PRESENT you can give up on protesting, ruminating, and blaming. Start with what you have left as the GIVEN. For example, when you look at your portfolio, say to yourself, "OK. This is what I have right now. Where do I go from here?" You can use "radical acceptance" to say to yourself, "I may not like the way things are, but let me start with what I have".

Start with dealt hand By using "radical acceptance" you can begin your future investments TODAY. Setting aside recent losses, you can look at your portfolio as if it were the first day of the rest of your life-as an investor. Start with the hand you are dealt. It's the only hand you have.

Fourth, rather than looking back at past losses, you can anticipate future opportunities. There are several opportunities in front of you. Keep in mind that in bear markets, cash is king. Whatever cash you have coming in for the future may have greater value because of cheap prices and deflation.

• Perhaps current stocks are cheap. This may be a buying opportunity
• You may have long-term future earnings. Your income may be your greatest asset.
• You may need to think about planning an on-going savings plan---- deducting a certain amount each month. And, this may be the opportunity to get your spending under control.

Warren Buffet Fifth, rather than avoid all future investment, get back in with a small investment. Even a small investment of $1,000 will give you something to follow going forward. It will help you overcome your focus on past losses. It will help you overcome your fearful avoidance. Getting back in with small and regular investments will help you learn that you are not defeated, you don't have to give up, you can still be an investor, and---possibly-if you take a long-term view---you might still make money.