Grey portfolios are scarier than red.
Most people think they view things in black and white. The reality is that everything happens in shades of grey based on individual experiences and perceptions.
Translation: We have become too comfortable and devise problems out of thin air. Michael Easter, the author of the New York Times bestseller The Comfort Crisis, is an expert in self-created issues.
Two studies prove his thesis. One involved showing 880 faces to individuals and having them determine which were threatening. A funny thing happened along the way. After about 200 photos, the researchers stopped inserting threatening figures, but that didnt stop the subjects from finding demons on their own.
In another experiment, the subjects’ job was determining whether specific scientific proposals were ethical. About halfway through, the researchers repeated the process and stopped including unethical choices.
The subjects generated morally questionable outcomes by themselves.
What causes people to fabricate threatening faces and shady science when they don’t exist?
The answer lies in comfort creep. When we experience fewer problems, we lower our threshold and generate more hollow problems. We are constantly moving the goalposts, adapting quickly to new comforts. Part of this is a human survival mechanism that enables us to conserve brainpower by not analyzing every situation.
These calculations occur in our subconscious, so we’re unaware of our tendency to shrink our comfort zones incessantly. Not acknowledging problem creep may cause serious ramifications to your investment portfolio.
Our world doesn’t overflow with puppies and ice cream, but why are investors so anxious when everything from Bitcoin to their homes and the NASDAQ is trading at record highs? While the rate for college grads is much higher, U.S. unemployment is around 4%, and inflation is trending downward. Anxiety should be shrinking, not climbing.
We can thank comfort creep for our investment anxiety.
Here are five reasons why investor angst is overshadowing record market levels.
1. Higher Expectations = Greater Disappointment
As portfolios grow, so do expectations. What once felt like solid growth now seems underwhelming. A 7% gain can feel disappointing when you’re used to 20%. Normal returns start triggering stress.
2. Fear of Giving Back Gains
The more you accumulate, the more you have to lose. No matter how routine, every dip feels like a threat to your hard-earned progress. Wealth becomes something to defend, not enjoy.
3. Increased Risk-Taking
Bull markets breed overconfidence. Investors stretch for yield, chasing trends and concentrating bets. This hidden risk causes significant anxiety when volatility returns—even if the market is still up.
4. Recency Bias and Fragility
After a long stretch of calm, even minor pullbacks feel extreme. Investors forget that volatility is normal and assume something must be wrong when prices drop.
5. Moving the Goalposts
Success breeds ambition. Instead of focusing on personal goals, investors compare themselves to others or try to beat the market. Satisfaction into stress.
What’s the antidote to avoid this affliction?
To keep yourself from being lulled into a false sense of security, then freaking out when the slightest problem arises, it’s wise to follow these three principles:
- Set clear goals for your portfolio with a baseline of expected returns. Doing this will smooth the inevitable rough edges of the market.
- Work on your emotional discipline skill set. Practice makes perfect, and being mindful of your anxiety triggers is a terrific first step toward conquering them.
- Develop a healthy respect for market cycles. Understanding that nothing is permanent in investing and life gives investors 20-20 vision of how the market fluctuates without formulating any predictions.
Creating fictional problems to anguish about isn’t your best time usage.
Be vigilant regarding imaginary demons looking to steal your most precious commodity – time.
