Freetrade’s top tips for Mental Health Awareness Week

Mental Health Awareness Week starts with a conversation. That’s because a large part of finding ways to achieve good mental health, and maintain it, comes from sharing your experiences with others.

That’s tricky when it comes to money though.

It’s often deemed a taboo topic but there’s no doubt our mental health is impacted by our relationship with investing and moolah in general.

Ups and downs are a natural part of life, and investing is no different (anyone holding stocks through the first few months of 2022 will know that all too well). 

Because our investments are often linked to real-world goals like a house deposit or retirement, money can play a significant role in our worries. We’re only human, after all.

If money is becoming a worry for you, remember we’re here for you, be it just to listen or to point you towards organisations and support groups you might find useful. 

And what better time than this week to remind ourselves of ways to keep that balance in check? Freetrade’s pulled together our top three tips for keeping a healthy mental attitude towards money and investing, even when that can feel especially challenging.

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1. Get back to basics. 

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There’s a bit of a myth in investing that the longer you do it, the more complex it needs to get. Thankfully, that’s just not true. There’s no graduation ceremony here and often the best investors keep it simple and stick to the fundamentals. 

If investing starts to feel too complicated and confusing, it might be your sign to take a step back, because it really doesn’t have to be.

Chances are, you just need to return to the foundations. It’s about relying on solid principles for good investing instead of getting caught up in whichever stock your friends are yammering on about at the pub. 

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That’s exactly what Tess prioritises when she’s investing. She says, “I manage the market’s volatility mainly by being "choosy" in which stocks I buy to begin with.”

Tess says, “I go for the companies or sectors that I believe will do well over time. I find it easier to deal with the volatility that way.” She’s not taking a shot in the dark when she invests, she sticks to the foundations.

It narrows her focus on investments she wants for the long term, as opposed to just for short-term gains.

A larger part of her portfolio is focused on sustainability for that very reason. Remembering the long-term horizon of the companies operating in green industries, like wind energy for instance, supports her in staying calm whenever share prices fall.

That simple reframe helps Tess keep her mind on the basics of investing, instead of getting too bogged down in the frilly nonsense.

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2. Know yourself.

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We really can be our own worst enemy when it comes to money. We’re emotional beings, so it’s only natural. But knowing the science of it all doesn’t stop us from reacting rashly or worrying. 

Here’s where a quick Buzzfeed-esque investment personality quiz might be useful.

Are you a panic-seller? 

Do you let short-term news sway you? 

Does a stock in the red feel like a punch in the gut or an inevitability every once in a while?

Knowing your foibles is the first step to knowing when those unhelpful behaviours are likely to crop up. 

The Honey team at Freetrade swears by Lee Freeman-Shor’s book The Art of Execution. 

It’s a great way to see if you’re an assassin, a rabbit or a hunter, so you can figure out how to stay true to your investment approach no matter what’s going on in the markets.

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Some investors love checking their portfolios but is that actually helpful?

“When I started investing I found market fluctuations and the temptation to repeatedly check my portfolio could cause stress,” says James. 

James says what he’s learned to do now is “stick to my long term plan, market fluctuations are a given and have less effect over a long period”. He also focuses on being mindful about when he checks his portfolio, mostly he does so “on fixed periods linked to when I want to take action and avoid doing so in between”.

This isn’t to say James outright ignores what’s happening to the stocks he’s invested in. It’s just that when he checks, he does so with intent. 

If an investment no longer appears attractive after a new earnings report reveals growth has slowed, that might be a good indicator to check on how those investments are now looking.

The market goes down as well as up, but over the long run, the ebbs and flows don’t have such a heavy impact. They generally even out, and as history goes to show, the market tends to increase in value.

James also thinks about what’s causing stress. He asks himself, “Am I holding too much of one stock? Is my portfolio too risky?” He adds that “being considered and confident in my portfolio decisions makes me accept the outcome without regrets.” 

Everyone has their own approach to investing, and changes in the market will impact our mental states differently. It’s not about trying to match the approach your friends take to investing, it’s about figuring out what works best for you, and sticking to it.

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3. Don’t just do something, sit there. 

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Sometimes buying is the easy part. Selling a stock is a different matter. Is a recent rise or big fall a signal to jump ship? What if it does the opposite tomorrow? 

Remember, beneath all the jagged graphs and charts, you’re investing in an actual company. 

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That’s exactly what Denzel focuses on when he’s investing. “I only invest in companies I know about or funds that I understand,” says Denzel. 

In doing so, he’s looking at how the business itself is performing, as opposed to how the world around it is reacting. That can help you stay calm during times of volatility.

Denzel says, “It’s great to easily be able to buy a piece of your favourite company. While the ease of access to the market is a big plus, there’s often distressing news around the world that can impact the performance of your portfolio”.

So he takes steps to ensure his mental health isn’t impacted by changing share prices.

It’s not about ignoring the information being thrown at you, but you have to know how to sift through it all.

He also “ensures that any investments made through Freetrade are only for long-term purposes”. 

Trading based on short-term news is sort of like flitting between queues in Tesco. Very often it’s better to do nothing than make speculative jumps back and forth. Plus, you’re only adding stress as you watch what you could have, or as it often feels, you should have done.

It’s a lot easier to invest for the long-term when you trust the people at the helm of the companies you’re investing in. When you have a sense of what management is trying to achieve with the company you’re invested in, you can then decide whether you agree with how they’re steering the ship or not. 

There’s no doubt knowledge is power, but in the world of investing, it’s easy to get caught up in details that don’t matter as much as you may think. When you feel knowledgeable and comfortable with your investments, you’ll likely feel a lot less worried during times of volatility. 

But fears are normal in all parts of life. 

If you’re dealing with financial, physical or mental health issues at the moment, it’s important not to ignore them. Asking for help sooner rather than later is the first step in making sure things don’t get any worse. Remember we’re here for you when you need us, no matter what the situation is.

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Important Information

This should not be read as personal investment advice and individual investors should make their own decisions or seek independent advice.

When you invest, your capital is at risk. The value of your portfolio can go down as well as up and you may get back less than you invest. Past performance is not a reliable indicator of future results.

Freetrade is a trading name of Freetrade Limited, which is a member firm of the London Stock Exchange and is authorised and regulated by the Financial Conduct Authority. Registered in England and Wales (no. 09797821).