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Want an anxiety free investing experience? Invest towards goals.

While fear and greed may be the overarching emotions that rule investing, what the vast majority of investors experience, especially in trying times, is anxiety.

While fear and greed may be the overarching emotions that rule investing, what the vast majority of investors experience, especially in trying times, is anxiety. A derivative of fear, it’s an emotion that’s present, in varying degrees, whether the market is doing well or badly.

If the market is doing well, some investors wonder if that will remain the case in the future. If the markets are heading down, they wonder when they will stop seeing their portfolio in the red.

The resulting anxiety which accompanies investing, especially in equity, is something many investors can relate with. Freedom from such anxiety often ends up deciding which asset classes investors will choose. This anxiety, and the ability to “handle” it, is also something that plays a role in deciding an investor’s so-called risk appetite.

Why is equity investing accompanied by anxiety and is this always true?

Almost everyone has experienced anxiety when investing in the equity markets. Equity markets by their very nature are marked by uncertainty and thus volatility in the short run. The success of the economy in the long run might be a fair assumption to make, but in the short run, emotions and events move markets more than what the individual reality of companies, sectors, and even the economy dictates.

When we are unaware of why or when something is happening, we automatically become uncertain and anxious. Seasoned investors though, tend not to feel anxiety as much. Why is that?

Most seasoned investors have a goal in mind

If you chase returns in the short run, or simply want to make a quick profit without having anything specific in mind, you are likely to experience greater anxiety when investing.

For the vast majority of us, we are investing not just for the sake of investing but to attain “something”. We might start out with something vague like saving because we should. This vagueness for most successful investors disappeared at some point and they graduated to specific goals.

Be it retirement or saving and investing for your child’s future education, having a specific goal in mind is the best defence against investing anxiety.

How does having goals reduce investing anxiety?

Goals need defining, no matter how inexact. They also need you to plan which needs assumptions, some data, knowing how to execute, a timeframe, and a reasonable set of expectations.

This goal centric approach makes you look at markets differently. They now simply become a means to an end.

For example, when your goal is to finance your child’s college education which is likely to cost about Rs 25 lakhs in 12 years, you know the timeframe. Considering equity is one of the best ways to invest for such time frames, and you probably have a set amount of money to invest, you now know that equity is the asset class for this goal.

Knowing the goal amount, also means you can plan your finances around this, and apply an SIP investment approach.

This goal centric approach makes you look at markets differently. They now simply become a means to an end.

All this means that you are better prepared and are now investing much more smartly. The daily or monthly fluctuations of the market become irrelevant to you because all you really care about is whether you are on track to achieve your goal amount. 

A periodic annual or semi-annual review is all that you need to make course corrections if the markets under or over perform compared to your assumptions. Investing for specific goals is not only a smarter way to invest but also a relatively anxiety free way to invest.

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