Normally, I would not think of stress as something positive, but as I observe human development and strive to understand what determines success, I see that learning to manage and cope with stress is fundamental to human achievement.
When astronauts escape earth’s atmosphere and gravitational force, they float through the air without the stress of gravity. In order to stay healthy and ready to return to earth, astronauts work very hard while in orbit creating stress and resistance with special exercise equipment so that their bodies won’t completely collapse when reentering earth’s gravity.
Children gradually learn from the stress of parental separation to become independent and self-actualized. When confronted about misbehavior, children also learn from the stress of criticism and negative assessment. I would guess that we all know some adults who still have not learned responses to criticism other than defensiveness and hostility. It is refreshing to encounter adults (and children) who can hear and even appreciate constructive criticism.
Even Good News Can Be Stressful
As investors, we encounter stress every day. Even good news can be stressful. For example, the U.S. stock market is at an all-time high and keeps going higher. Is this a case where good news is actually bad news? No one knows when the market will top out and turn down for a double-digit correction. Just because the market is at an all-time high does not mean that it won’t keep going higher, especially in the face of low interest rates, low inflation, robust corporate earnings, and a recovering housing market. This is what bull markets do—they keep going higher until they do not.
Confronting the unknown is stressful, but it is the kind of stress that makes us stronger and more successful as investors. So what if the market turns down 10% to 20% or more. Do you remember how it has recovered over the past five years, from 2008/2009? Some people haven’t.
Worry Is Stressful
There is an old saying that “Wall Street Climbs a Wall of Worry.” In order to develop successfully, human beings also climb a wall of stress.
Personal and political conflict is stressful. The conflict between Ukraine and Russia has been extremely stressful. If you sold all your stock or mutual funds in response the crisis in Ukraine, too bad for you financially, because the stock market has continued to go up.
The insurgency in Iraq continues to be discouraging and stressful. If you decided to go to cash because of it, too bad for you. The market has continued to go up.
The U.S. government continues to bicker and procrastinate while our roads and bridges become more dangerous to travel every day, yet the market continues to go up.
Stress Makes Us Stronger
Stress is good because it gives us the chance to develop mature muscles that do not fail us every time stress gets in our face.
Stress is very important in the process of Financial Planning and Retirement Planning. Our clients want to be sure that stress will not cause their plan to fail. Stress–testing is one of the most valuable ingredients in a reliable plan.
Based on the client’s age, capital at work, and required distribution, we are able to stress test 10,000 possible historic market gains and losses so we can predict probability of success for each and every plan. Clients gain important knowledge from the planning process:
- How much longer should I continue to work as I do now?
- How much more do I need to save and invest?
- How much sustainable spending can I afford annually?
- Can I afford a vacation home and still retire?
- Can I afford to help my children buy a home?
Stress can make us stronger, and those who develop mature muscles from handling a variety of stressors over the years will become wise decision-makers even in the midst of various types of stress.