When the market sinks and takes your portfolio lower, do you ever confuse your net-worth (your stock portfolio) with your self-worth?
During days (or weeks) when the bears beat-up your stocks, do you feel as though they’ve used you for a punching bag? And then, do you turn the finger of blame on yourself? Maybe you think, I knew my stocks were looking toppy. But I didn’t do anything about it. Now, my positions are losing money. I am as dumb as a box of rocks.
Please know that this is a common mental and emotional challenge for traders and investors. Most of us have struggled with this situation at one time or another. We consciously or unconsciously believe that sinking net worth = failing self-worth. And that kind of thinking can be detrimental to our wealth. We may start viewing the market–and indeed the entire world around us– as a negative place.
Here’s the good news: Net-worth and self-worth do not go hand-in-hand. In fact, these two segments of our lives are mutually exclusive. So let’s reframe that old net worth = self-worth belief system and free ourselves up from this non-productive mindset.
As mentioned above, for the purposes of our discussion, we are defining “net-worth” as the value of our stock market portfolio.
Now, let’s define “self-worth.” We can divide our definition of self-worth into two categories: self-esteem and self-confidence.
Our self-esteem is the function of our core value system and how we conduct ourselves. I believe that we are only as strong as our principles—and how closely our behavior matches them. When we build our principals, or core values, on honesty, integrity, generosity, sincerity, caring and sharing. When we adhere to those values in every situation in our lives, then we come from a position of strength in everything we do. We have unshakable self-esteem. We trust ourselves, and we respect ourselves, at all times.
However, we all know people who practice “situational ethics.” Maybe they adhere to honorable core values when it’s comfortable, and forsake them when it’s not. Just so, deep down inside, their self-esteem or how they see themselves may be “shaky.” And since they can’t trust themselves, how can they trust their own decisions, financial or otherwise? As you might imagine, this kind of mindset leads to an unreliable approach to the markets… which leads to unreliable results.
Self-confidence is another side of self-worth. Our sense of confidence is strongest when we have established a firm foundation of self-esteem within ourselves. Beyond that, our self-confidence fluctuates depending on where we are, the people around us, and what we are doing.
To achieve your best success in the financial markets, make sure your core value system is unshakable and provides a firm foundation for your self-esteem. This way, you always come from an inner position of strength. It follows that when you come from a position of strength, you are naturally energized with a positive attitude of calm self-confidence. That state of mind naturally buffers negative feelings of loss (and is scientifically proven to lead to the best decisions).
When you have losing days–and everyone does–please remember that your self-worth need not be compromised. As long as your self-worth remains unshaken, your net worth will have the propensity to rise.
Keep green on your screen,