There's no doubt that 2020 was a terrible year. It included almost 2 million worldwide coronavirus deaths, staggering unemployment levels, innumerable businesses going under, stock markets collapsing (and recovering), and political turmoil. All this chaos led to a lot of doomscrolling, which Merriam-Webster defines as "the tendency to continue to surf or scroll through bad news, even though that news is saddening, disheartening, or depressing."
Investors are particularly prone to falling into the doomscrolling trap. Many listen and react to the news, especially when it comes to buying and selling securities. Whether it's energy markets collapsing, tech companies being threatened with breakups, or the airline industry struggling for survival, stock market followers can get caught in a never-ending spiral that leads to negativity (not to mention impulsive trading decisions).
Have you been doomscrolling? Are you somewhat addicted to reading bad news and letting it affect your mood? If so, this is a pattern you can reverse. Below are four investing tricks to help you overcome these tendencies.
1. Stop obsessively checking your portfolio
One way to quickly fall into a funk is to frequently check how your portfolio's doing -- especially in a volatile market, as we saw in 2020. You might start the day up by 1%, only for news and negative sentiment to take it down 1% by the end of the day. The portfolio can go through considerable gyrations during the seven hours between when the market opens and closes.
Develop the habit of checking your holdings no more than once a day. Even better, go for once a week. Investors, unlike day traders, are in it for the long haul, so it doesn't matter what happens minute by minute. You'll be surprised how much peace of mind you can discover by focusing more on your life and less on the stock market.
2. Structure your investment research time
Have you ever read a news article about a company you own, and then found yourself falling into the proverbial rabbit hole of information? You may have started reading an earnings report, only to end up an hour or so later testing the age of your brain.
One way to avoid this is to set aside specific times during the week for researching stocks. You can still check the news for a few minutes daily, but end it there. Then, schedule an hour or two per week or month to thoroughly review your holdings or look for new companies in which to invest.
3. Create a financial plan
Have a financial plan that covers how and when you'll add new money to and rebalance your portfolio. A specific strategy will help you stay focused on your financial goals when you're feeling down and out. Instead of worrying about the future, refer to your plan when things get shaky. It will remind you how far you've come, where you are now, and where you're going.
4. Focus on the long term
Accumulating wealth through the stock market isn't a short-term endeavor. Trying to time the market and day trading are recipes for disaster. You're more likely to lose money that way than to build anything substantial.
Purchase stocks that you plan to hold for no less than five years -- and even longer is better. After all, the long-term average of the stock market is around 10%. Keeping your eyes on day-to-day moves has no bearing on what will happen over a period of years or even decades. Holding a long-term portfolio means there's no need to check your stocks daily. One day's -- or week's, or month's -- moves will likely be irrelevant over the long term.
Doomscrolling can lead to depression and despair. If you fall into that pit, it's almost impossible to keep your eyes on the prize -- accumulating long-term wealth for house purchases, retirement, your children's education, and anything else that costs money (which is almost everything).
Concentrating on the four steps outlined above will keep you out of a negative spiral and on track for a happier, richer 2021.