Overcoming Fear In Life And Investing

I recently read Open: An Autobiography by Andre Agassi, which is not so much a story about tennis as it is about personal triumphs in the face of great odds. At one point in the book, Agassi talks about advice he once gave a beloved American singer-songwriter about not surrendering to small fears. As Agassi notes, once you surrender to small fears, you begin to surrender to larger fears. The same can be true for giving up or quitting. Once you quit the first time, it’s much easier to quit the next time and the time after that. So how do you stop the cycle?

The antithesis of surrendering to fear is conquering fear. Logically, if we challenge ourselves to overcome small fears it should be easier to conquer our larger fears. While that sounds good in theory, it can be harder to achieve in practice. However, it’s by no means impossible.

Productive vs. unproductive fear

Conquering fear begins with differentiating productive from unproductive fear. Productive fear warns us of danger and can help keep us alive—hence our fight or flight response. It prompts us to take cover during an electrical storm or think twice about driving across a flooded road. Unproductive fear, such as cancelling an interview for a job you want because you’re afraid you’ll botch the interview, can prevent us from accomplishing our goals or living the life we desire. It can lead to making what we think are “safe” choices—putting up with a bad job, an abusive boss, or a failed romantic relationship—due to our comfort level with what feels familiar. As the saying goes: “Better the devil you know than the devil you don’t.” In reality, if fear is keeping you from living the life you desire, it’s providing a false sense of security. Worse, it could be harmful to your long-term wellbeing.

It’s not uncommon for fear of failure to stand between people and their ability to accomplish their goals. I’m no stranger to failure. Over the course of my career, I’ve learned as much about failure as success. In many ways, success can actually be enhanced by failure. For example, my failures have taught me far more about my strengths and weaknesses and ways I can use this knowledge to not only lift myself, but others along the way.

Healthy failure can lead to growth

Like fear, there are essentially two kinds of failure: healthy and unhealthy. An unhealthy failure is one that you might have seen coming but did nothing to stop. While you can’t always prevent this type of failure, you can control your response. For example, if you experience a flat tire, you can choose to fix it and move on or give up altogether and slash the other three tires.

Healthy failure, on the other hand, is about viewing shortcomings as a learning experience and an opportunity for creativity. As a result, you may be more willing to get out of your comfort zone and try different things. That can lead to greater resilience and the likelihood that you won’t give up if something doesn’t work out the first time around.

Over the last two years, I’ve seen business owners take extraordinarily courageous steps to reinvent their business models or launch new business ventures despite the uncertain global economic climate we’ve experienced throughout the pandemic. For some it was simply a matter of survival, while others saw opportunities to fill gaps by creating new business solutions or delivery channels. While not all of them succeeded, all took that first step to overcome whatever fear or trepidation may have been lurking in the back of their minds—or in some cases, beating loudly in their chests.

The problem with fear is that if you allow it to control all of your decisions in life, you can miss important opportunities to live life on your terms. I see that in my business whenever the markets experience a pullback or correction. Even short-term market movements are enough to create doubt among some investors, causing them to second guess their strategies. That lack of confidence can lead to emotions taking over, resulting in poor or reactive decisions that are not aligned with an investor’s goals. While it may seem obvious, there are reasons why people may overreact to market fluctuations:

• Emotionally, we feel losses more than wins.
• It takes longer to recover from losses. For example, if you lose 20% of $1 million, or $200,000, you will have $800,000. If you only earn a 20% return on the $800,000, you will have $960,000. So you need a 25% return on your money to get back to the original investment.
• No one can afford to lose irreplaceable capital. That’s the money that must be preserved as much as possible because if it’s not, you may suffer a major change in lifestyle.

With more than three decades as an investor, wealth manager and business owner, I can say with confidence that investors should be very afraid of the markets if they approach investing without a plan for how they will seek value or how they expect to manage risk. While there’s always the potential to lose money with any investment, it’s nearly inevitable if you’re investing without a well-defined strategy in place. That’s why planning is so important for managing risk. For example, at Carson Wealth, our approach to risk management always begins with a financial plan. That’s the only way to align an investment strategy with an investor’s personal goals, time frame for accomplishing their goals, and risk tolerance. Below are some of the questions we ask as we walk new clients through the investment planning and discovery process:

• What is the goal of the funds? Are they to be used now, at some point in the future, or are they funds you would like to leave as a legacy?
• What are the expectations you have for these funds when it comes to risk and reward?
• What part of your portfolio do the funds we are investing represent? What percentage do they represent in your liquid portfolio and overall portfolio?
• Are the funds qualified for tax deferral?
• What is your comfort level with investing, or how much investment expertise do you have?

These questions and more help to form the foundation of a financial plan and investment strategy that your wealth advisor can continue to build upon that is customized to your family’s needs and goals. A well-maintained plan provides something tangible that you can measure progress against, It also adapts to evolving financial conditions and changes in your life or priorities over time. That can go a long way toward replacing concern with confidence, no matter what direction the markets take.

In 2022, I challenge you to not give into small fears, but to conquer them. Whether that’s taking the leap to find a new job, launch a business, begin a family, or take up hang gliding, begin by documenting your goals and putting a plan in place. Your future will thank you.

Interested in learning more about your personal comfort level with risk? Take our complimentary, online Risk Survey.