The Van Trump Report

Managing Stress is Critical for Making Good Decisions

Most of us are currently under enormous pressure with stress hitting particularly hard on two fronts – the health of ourselves and loved ones, and our financial situations. Stress and anxiety are understandably off the charts but it’s more important now than ever that we manage them in order to avoid making BIG mistakes we’ll regret further down the road. 

I am constantly reminding Michelle and the kids that this is when the best-of-the-best have a vision and stick to a longer-term plan. The majority of the masses will get caught up in the hype and panic of the moment and ultimately get way off course by focusing on the immediate and urgent rather than the more important further out objective. 

Stress takes a significant toll on our minds and impacts our ability to focus and reason, especially further out on. the horizon. As Peter Sokol-Hessner, a cognitive neuroscientist at the University of Denver explains, “It causes you to fall back on simpler methods of approaching your world. You have a decreased ability to use your previous experiences and knowledge to make smart choices in new settings.” I argue that stress also hinders our ability to see and embrace different perspectives. By nature, we tend to race immediately to what seems the most comforting. Unfortunately, what’s most comforting is often simply what we deem best for our immediate situation. 

In the trading and investment world, we call this “talking our own position”. In other words, if I want corn prices to go higher because I’m either bullish corn or produce corn,  I will most generally be much more receptive and open to a bullish story or bullish argument. In the case with. COVID-19, we want to be more receptive of stories that say it’s all overblown and simply a byproduct of “fake news”. We don’t want to think or believe our families could be in harm’s way. That type of thought would put everything we have worked for at-risk and create massive uncertainty. 

The good news is, oftentimes, keeping these “blinders” on can actually work. This doesn’t mean you right in your thinking just rather lucky in the way it worked out. Remember the old saying, “even a broken clock is right twice a day.”        

To understand why stress affects thinking and memory, it’s important to understand a little about how the brain works. Your brain isn’t just a single unit, but an interlinked group of different parts that perform different tasks, says  Dr. Kerry Ressler, chief scientific officer at McLean Hospital and professor of psychiatry at Harvard Medical School. Researchers believe that when one part of your brain is engaged, the other parts of your brain may not have as much energy to handle their own vital tasks. For example, if you are in a dangerous or emotionally taxing situation, the amygdala (the part of your brain that governs your “fight or flight” survival instincts) may take over, leaving the parts of your brain that help to store memories and perform higher-order tasks with less energy and ability to get their own jobs done. “The basic idea is that the brain is shunting its resources because it’s in survival mode.”

This shunting impairs our cognitive control and ability to think “flexibly,” which both play an important role in an individual’s ability to ADAPT to continuously changing environments. Stress amplifies the negative as well. In survival mode, our threat sensitivity rises and NARROWS the mind’s focus on predicting danger. That, in turn, makes it more difficult for us to recognize anything that might be viewed as a different perspective.

Severely impaired thinking is definitely not what the current situation calls for which is why it is so important we first recognize that we are under enormous amounts of stress, and second we actively work to manage those levels. Below are some various ideas and tips on how to keep our heads on straight as we try to navigate this crisis. (Sources: Harvard Health, Brainline, Wall Street Journal, Forbes)

Establish Control: There is no way to control the spread of the virus or plummeting stock prices but there are countless other things in our everyday lives that we do have control over. Mauricio Delgado, a psychologist at Rutgers University says that when people perceive they have some control over their environment, that simple belief can help them persist in pursuing their goals. One area that has been severely disrupted for many of us is the daily routine, something that’s very important in helping us cope with change. Once the daily routine is established, move on to other aspects within our control, like diet and exercise.

Find an Outlet: If you find that you’re struggling with negative emotions, find a good outlet for them. By focusing on something else, worries will fade into the background for at least a little while and help your mind calm down. Dedicate more time to a current or new hobby. Do some deep cleaning. Learn something new through an online class. Bake some bread. Make anything. Get your garden started. Just do something!

KVT’s Top-3 Mental Hacks for Navigating Rough Investment Waters: 
When Things Change… I Change! I personally like to view each open and each close as a brand new day. Based on what I know this morning, do I want to own these stocks or investments. My big hack is that I was taught to NOT focus on “price” or “profits and losses”. I focus on what I think to be true… I can not control price. I believe too often most amateur traders and investors focus heavily on profits and losses. In turn, they tend to cut or take their profits way too early and let their losers run way too long, just the opposite of the best. Most amateurs tend to look at a stock they are down -10% to -30% in and simply choose to cost-average into the position despite the fact they know and understand the entire world has changed and the underlying landscape is massively different. They stick with past premises despite the massive change in landscape, trying to mitigate and manage “price” rather than theory and vision. I ask myself every morning, If I had to buy this stock or commodity at this very moment in time, not having any current position or any profit or loss to consider, would I put good money to work? I ask myself at the close of trading every day… based on what I have learned today, would I want to buy or sell any of these positions currently in my portfolio regardless of profit or loss? Longer-term investors could look at their positions and make a decision once a week, once a month, or perhaps once a quarter.

“Price vs. Value”… Don’t Get Fooled! Avoid other people’s panic. Make your mind up about what to do outside of the fire and take a macro view, not simply price today compared to where it was, or profit or loss in a position. I hate hearing an investor say, “that was a $200 stock and now it’s only $50, that’s a great bargain.” Perhaps it might be, but then again it may have gotten hammered because the entire dynamic of the space or company has changed and it’s on its way to bankruptcy. Remember, it’s never about “price” and always about future “value”. If you focus on “price” you can easily be fooled into thinking something is a bargain, but when you focus on future “value” there are a lot more questions. Right now the best investors and traders in the world are having a very difficult time forecasting and assessing future “value” and that’s why we are seeing massive swings in “price”. If you learn one thing… FORGET PRICE, in the end, it never really matters, it’s all about being right about future “value”.

Intuition Becomes Highly Important –There is a ton of debate about human intuition. Some experts believe the more complex the situation, the more misleading intuition becomes. They say in a truly chaotic environment—where cause and effect no longer have a linear relationship—the last thing you want to do is try to apply patterns of intuition. I personally believe just the opposite! I like to trust more in my intuition when variables become more complex and dynamic. I tend to believe our risk-averse, rational minds can lead us to overthink, over-analyze, and ultimately make poorer decisions when the number of variables begins to rapidly increase. Our intuition, however, is shaped by our past experiences and our existing knowledge. The more experienced you are in the domain you’re deciding on, the more accurately your intuition can offer you the most optimal decision. Although it can be useful to seek counsel from others, remind yourself that they don’t necessarily know what is best for you. Take their advice into consideration, especially if they’re more experienced than you are in a particular area. Ultimately, however, you lived your life and fully experienced it, making you the best person to decide what to do next. The key to mastering what I consider the sacred gift of intuition is learning to listen to it. The more attention you give it, the more powerful and accurate it will become. There are thousands of examples where investors went with their “gut” rather than what the analyst was forecasting inside the numbers. i.e. Fred Smith has an insight into the transport business and, despite widespread skepticism, goes on to create Federal Express. Michael Eisner hears a pitch for an offbeat game show and despite others passing, knowing in his heart it’s going to be a blockbuster, immediately commits millions to develop Who Wants to Be a Millionaire? Robert Pittman has a vision of the future of on-line media while taking a shower and rushes to lead America Online. In fact, a few years back, Johnson & Johnson CEO Ralph Larsen gave voice to this common, if unproven, assumption: “Very often, people will do a brilliant job up through the middle management levels, where it’s very heavily quantitative in terms of the decision-making. But then they reach senior management, where the problems get more complex and ambiguous, and we discover that their judgment or intuition is not what it should be.” 

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