The Emotional Side of Investing: Part I – Fear

by: Cassandra Laymon, CFP®, MBA

When I recommitted my life to Christ a few years ago, I was tempted to believe that the roller coaster of emotions I had been experiencing for years – primarily fear, worry, and anxiety –would all but disappear. I believed that if I was doing everything “right” then those negative emotions would be taken away.

There are hundreds of verses about fear in the Bible. In Philippians 4:6 it says, “Don’t worry about anything” and Isaiah 41:10 commands us, “Do not be afraid.” It all sounds easy, but in practice I’ve found that managing emotions is a little more complicated.

Imagine my relief when I recently came across this passage from the book Emotionally Healthy Spirituality by Peter Scazzero:

“To feel is to be human. To minimize or deny what we feel is a distortion of what it means to be image bearers of our personal God. To the degree that we are unable to express our emotions, we remain impaired in our ability to love God, others, and ourselves well.”1

I interpret this passage to mean that even as we put our faith in Christ for all things, we’re still going to experience some emotions along the way. And that is a good thing.

You might be asking, “What does this have to do with investing?”  On a daily basis, we work with people who have fears around money and investing. Here are two common scenarios:

First, there are people who suffer from the fear that “there will never be enough.” As I write that, I will admit to you that I lived with this mindset for a very long time. I always thought “just a little more” would put my mind at ease.

“The rich think of their wealth as a strong defense; they imagine it to be a high wall of safety.”  ~Proverbs 18:11

The best cure that I’ve found for this malady is a good dose of gratitude mixed with generous giving. That might sound trite to you, but it wasn’t until I was able to fully appreciate all that I had been blessed with that my fears started to abate. Accumulating money and possessions certainly doesn’t guarantee a long and stress-free life.

A second mindset I often see is in people who are afraid to lose ANYTHING.  The fact of the matter is that all investing comes with some risk and the markets are constantly changing. They may say things like, “If I could keep it under my mattress, I would.” This is challenging for a financial advisor who knows well that outpacing inflation and meeting financial goals requires prudent risk taking.  To navigate this challenge, we do a risk assessment. This consists of a number of hypothetical questions that will help us to identify how much risk you are able to take.  It won’t surprise you that when you are sitting in an office answering these questions, your risk tolerance is often higher than when you are watching the evening news after a particularly tough week (or month, or year!) in the stock market.

To most accurately assess someone’s risk, I use hypothetical questions to try and get a person to experience an emotion. Instead of asking, “How would you feel if your account went down by 20%?”  I ask, “If you invested $100,000, and one year from now you opened your statement and it showed you had $80,000, how would you respond? How about $70,000? When do you really get a stomach ache?”

In this case, I’m trying to acknowledge that fears do exist. Fear is sometimes healthy and protects us from real danger. Rather than saying to a fearful investor, “Be strong and courageous,” (Joshua 1:9) I am going to acknowledge that God made each of us uniquely, and do my best to come up with a solid plan that not only fits the financial need, but the emotional one, too.

Investing can wreak havoc with our emotions. Taking the time to acknowledge those emotions and getting help from an objective party such as your financial advisor can help to make the road ahead a little smoother and help you to make wise investing decisions. If this is an area where you could use some additional help, please give us a call.


Financial Planning & Investment Advisory services offered through Beacon Wealth Consultants, Inc.