September was tough for investors. Most stocks lost between 9 and 12% during the month. Bonds struggled as well.

2022 has been tough for investors. See the chart below.

The green bars represent last month’s returns. The brown dots are year-to-date total returns. Yes, they’re all below zero.

Returns like this can test even the most optimistic among us. We believe the long-term outlook is still unquestionably bright, but short-term pain can bring real challenges.

Many of those challenges are psychological or behavioral in nature. Based on a few conversations with friends and clients, we may be entering a new phase of the bear market, the dreaded “I can’t look” phase.

Statement arrives, either in the mailbox outside or the virtual inbox. Envelopes and emails are handled with extreme care to ensure contents are not accidentally released into the open. After immediately filing in the appropriate folder, we safely move on to happier endeavors. Crisis averted.

Maybe this is our subconscious way of protecting us from ourselves. Why?

Losses hurt more than gains feel good. In other words, making $1 and losing $1 elicit different emotional responses. And research has shown the feeling of loss packs a bigger punch. By not looking, we avoid (or at least postpone) the pain that comes with losing money.

For those struggling to look at account values, here are a few ideas to consider or questions to ponder that may help make lemonade out of lemons:

• Revisit your plan. In our experience, people often want to know, “Am I still ok?” And ‘ok’ means something different to everyone. When planning for goals 10-20 years into the future or more – like retirement spending goals, or college savings goals – down markets are often taken into account. Despite 2022’s ugly returns, the odds of reaching those goals might not have changed too much. And if circumstances are different, understanding what steps to take to get back on course can bring peace of mind.

• Get personal. Back to the first bullet – ‘ok’ means something different to everyone. Take broad advice from industry experts or social influencers with the appropriate amount of salt. Rules of thumb are just that, not specific advice tailored to an individual’s unique situation. Put the personal back in personal financial planning. Spend time defining or confirming the goals that are important to you. What do you want the first 10 years of retirement to look like? Or the last 10 years of work life? The pundits offering advice certainly have no way of knowing who is listening on the other end.

• Should I be buying? We hear this question plenty, and everyone seems to have an opinion. Stocks certainly seem more attractive now than they were at the beginning of the year. Bonds seem more attractive, too. We believe good opportunities exist for long-term investors. And we could still see meaningful downside before the next bull market begins. But that’s different than suggesting people blindly “buy now.” For investors with long-term objectives and available cash, consider the pros and cons of buying all at once vs. averaging into stocks based on a planned schedule.

• Should I be selling? Another favorite question. There may be some very good reasons to sell. Among those are tax loss harvesting and bringing your investment portfolio back in line with target allocations. But we don't think fear should be on the list of reasons to sell. Markets tend to be most volatile around inflection points like market bottoms. For those who have been fully invested during the drawdown, participating in the initial stages of the recovery could be critical to staying on track.  

Interested? Please reach out to me at eric@divviwealth.com or schedule time with the Divvi team to continue the conversation.

Opinions expressed herein are solely those of Divvi Wealth Management and our editorial staff. The information contained in this material has been derived from sources believed to be reliable but is not guaranteed as to accuracy and completeness and does not purport to be a complete analysis of the materials discussed. All information and ideas should be discussed in detail with your individual adviser prior to implementation.