It’s ridiculously easy to find “success literature” stories of people who are stuck living out old scripts – so-called limiting beliefs that no longer serve them (or never served them), but they are still living according to those beliefs or rules.
And usually, those beliefs center around fear of some kind, though people are not conscious of that.
Sadly, these fear-based beliefs can have huge effects on the financial decisions people make.
Here’s an example: A couple years ago, as I was sitting on a plane, two guys behind me struck up a conversation. The obviously hadn’t known each other previously, but somehow their conversation drifted to the stock market, and how they didn’t trust it.
“I got out a couple years ago and I’m not going back in yet,” said Guy No. 1. By a quick account, I figured that he exited near the bottom of the market in late 2008 or early 2009, and then missed the subsequent rally that began in March of 2009.
“Oh yeah, me, too,” said Guy No. 2.
They were clearly impressing each other with what they believed to be extraordinary market savvy, but they were stuck in a place of financial fear and distrust. In the short run, they missed out on some big stock-market gains, but the long-run implications are far worse.
We live in an era of media-stoked fear. Competing political TV networks exhort viewers to completely distrust and dismiss anything the “other side” says, resulting in a nation of paranoids who express the conspiracy theory du jour on Facebook.
The financial media aren’t much better, breathlessly encouraging viewers to trade every day’s events. I can only imagine the mental condition of the poor soul who takes all this contradictory advice literally, and trades China’s PMI one day and pending home sales the next. This is a perfect example of stoking financial fears.
And it’s not just the financial media, which is aimed mostly at men. The financial media tends to cloak the fear-mongering in as left-brained “analysis,” but it’s fear, all the same. (“How to play today’s jobs report?” The implication being that if you are not “playing” it, you are missing out on big, big, life-changing portfolio gains. Nonsense.)
But the women’s media is perhaps even more expert at this, unabashedly using the embarrassment of social stigma (“My closet doesn’t look awesome enough!”), health concerns, and worries about the children to stoke fear, which, in turn, eventually stokes ad dollars. If you want first-hand documentation of how the women’s media makes money by scaring its audience, read Myrna Blyth’s excellent book on this topic.
Remember benzene in your bottled water? Alar on your kids’ apples? Not so scared about those anymore, are you? That’s because the media have moved on. They have to. They have products to sell.
You can’t follow all the fear-based advice, because it will only send your account into fresh havoc on a regular basis. I know traders who make panicked buys and sells. Sure, they have some big wins now and then, but over the long term, they generally operate in the red.
Try to keep in mind: Much of your world view, including that of the stock market, is likely manipulated by the media. Everybody says they are immune to it, but almost nobody is.
Fear-mongering is often disguised as being smart or sophisticated. Fiscal cliff, anyone? Remember all the terror spread by the chattering classes on that one? Sequestration? Don’t worry (pun intended), there’s another scare tactic coming soon, and it will be packaged as something only the most sophisticated among you need to worry about.
Of course, that’s you, right? What you just read about government spending and your portfolio. Better start worrying about that!
The two guys on the plane who sold out at the bottom of the market and hadn’t gotten back in? They were acting sophisticated, but they were making rookie mistakes.
So if you have the belief that your financial survival depends on reacting to news, price movements in individual stocks, or whatever economic development the TV anchors say you are supposed to “play” today, you are operating from a fear-based belief system, and it is not serving you well. It is serving them well. Their interests are not aligned with yours, and it’s important to remember that.
Image by University of Salford