One of my favorite bloggers GoCurryCracker has a wonderful article on Exposure Therapy. He basically gives advice that is contrary to a lot of other finance bloggers who say ignore the stock market completely (which I would argue is a little impossible in our tech heavy, media heavy world). GoCurryCracker suggests that yes we should ignore it as in not change our plans based on it, but that we should also pay attention when it drops so we can see how we feel ‘losing’ money.I now have personal experience that shows this approach works. February of this year was a wild ride. At one point in January we topped out at a 7% gain already – my average for the whole year. February took it all back and then some so when I logged into my Vanguard account I expected to feel something when I saw I’d ‘lost’ almost $17,000 – basically my annual spending budget – and was shocked that i felt…nothing.
I don’t want to get cocky and think that I’ve somehow overcome one of our many human failings, but I expected to feel something – a little bit of uncertainty or fear or anger, but instead it was like I was glancing at the box office return for a movie I’ve never heard of and cared nothing about. I didn’t even come close to contemplating selling anything as people apparently do in this situation. In fact that made even less sense in my mind (which it logically does, but we usually have fallacies of logic in downturns).
Instead since I still had a job I was excited that my $5,000 of 401K money was about to hit during this correction. Hopefully this trend continues even into retirement, but until then I’m going to keep giving myself exposure therapy. It seems to work.