Three strategies to tackle fear as an investor

2. Ignore fear by trusting in the long run

“Buy shares, take some sleeping pills, and stop reading the papers. Many years later, you will see you are rich.” This is the mantra of investor legend André Kostolany and the core of the “ignore” strategy, that is, trusting in the long run.

There are a few outliers, of course, but by and large, investors made 6%-7% in real terms every year by holding US stocks. So why worry, then, if it will all turn out fine in the end?

Financial markets have the fantastic feature of providing liquidity and valuation any time they are open. However, this poses a major problem for us human beings, as we can follow the changes in the net value of our wealth, in real time and to the very last cent, which turns into a stressful experience when prices collapse.

One of Swiss wealth manager Julius Baer’s seasoned investors shared his secret on how to deal with these stressful experiences when markets collapse: “Switch off the computer and go for a walk!” This is a classic way to ignore fear.

3. Embrace fear by growing spiritually

The final strategy is about accepting that losses are a fact of life and learning how to grow based on the experience.

The Western way of handling this is best exemplified by an individual account: in the book What I Learned Losing a Million Dollars, investor Jim Paul tells the tale of a costly experience he had in financial markets and what he learnt from it.

Let’s not spoil the reading by retelling the learning, but as occurs every so often with US investor legends, Paul says that he became a better investor by taking the loss and drawing conclusions from it.

This is a bit reminiscent of the fairy tale Hans im Glück (Hans in Luck) by the German Grimm brothers, where the protagonist learns a valuable lesson from losing a fortune, which helps him to gain deeper insights on life and its meaning. Indeed, it provides some consolation to those struck by adverse fate in financial markets too.