The Troubled Mind of Mr. Market

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Isn't there anything he advised you to do to feel less helpless?

He said I could sell some of my stocks and move into more conservative investments like bonds. I could also sell some riskier stocks in favor of less volatile names. Or try more complex hedging and risk management strategies. But if I did any of that, it might hurt the long-term return on my investment, he said. "No risk, no return. No pain, no gain." Blah, blah. I'm really sick of his smug tone.

Also, I could buy extra stocks right now. He pointed out that, from a historical perspective, stocks were quite cheap. He says it's just like when you buy extra amounts of your favorite foods when the supermarket puts them on sale. But he said that would be a brave move, because stocks could keep falling for months or even years.

Doctor, is it wrong for me to worry so much about my investments?

Mr. Market, you'd be surprised how often money is mentioned in this office. I find every patient has his or her own tolerance for risk. Maybe you're not suited for aggressive investing. Maybe you need to give up some long-term returns in favor of some peace of mind.

My adviser and I talked about this a couple years ago, when the market was doing well, and I said I wanted the most return possible, especially because I wasn't retiring for a couple decades. So my adviser diversified my investments, but he put almost all of it in stocks.

Isn't that basically a buy-and-hold strategy?

Yeah. And, hey, that didn't work well for me in 2000, when I invested everything in Internet pet supply retailers.

But there you didn't diversify. You shouldn't have had all your money in one kind of stock. You should have invested everywhere, including internationally. That helps minimize unnecessary risk.

Now you sound like my financial adviser.

Let me show you something. What do you see?

Um, a mountain range. Or, a snake colliding with a brick wall.

No, it's not a Rorschach test. It's a chart of the S&P 500 index over the last three decades. You'll notice that it's generally moved higher. But it hasn't moved in a straight line. Often, just as it hits a low, it suddenly bounces back.

I know, you're right. It's impossible to predict. If that were a roller coaster, it would be a very bumpy ride. Everybody keeps saying I need to stay in the market to catch those big movements up, but I do wish it weren't so stressful. I can't watch CNBC without swilling half a bottle of Maalox.

Maybe you should be ignoring the news for a while. Let's focus on something that you can control. How about your job? Or let's talk about how much you're saving every month. Isn't that a more healthy way to spend your mental energy?

I guess so, Doc. My job is going O.K., as long as I don't get laid off. (Anyway, that's what I told those consumer confidence guys when they called me on the phone.) I guess I should be saving more. Heck, maybe I should plow some of that money into the stock market before it goes back up again.

I think you can't decide whether to be afraid or greedy. If you invest more in stocks, and they keep falling, you'll be back here on the couch complaining again even more loudly.

Well, that's why you get paid the big bucks. Listen, let me tell you about another dream I had: Warren Buffett and Bill Gates were playing air hockey while Steve Jobs was bathing a monkey….

I'm sorry, Mr. Market, our time is up.

But it's only been 45 minutes! We usually talk for an hour.

I know, but I had to shorten session times so I could take on more patients.

Huh? Why, Doctor?

Hey, times are tough. You think you're the only one who took a beating in this lousy stock market?

Steverman is a reporter for BusinessWeek's Investing channel.