Life is a continuous journey where we keep trying to put our best foot forward. But life has its own ups and downs. Sometimes even the most well-intentioned and well-researched actions do not produce the desired results, even in our financial lives. Maybe the markets will turn, maybe they won’t. Suffering an investment loss happens to most investors at least once, and a major loss can result in trauma that can be hard to overcome if not managed properly. Now the question is, how to handle these losses? The answer is not to shrug it off like it doesn’t matter. It does matter. It is completely natural to feel depressed after such a trauma. Being smart doesn’t mean you don’t talk about it like nothing happened or it also doesn’t mean you take the trauma so much on you that you start to lose your health. It can result in a loss in your other investments.
“Every once in a while, the market does something so stupid it takes your breath away.” Jim Cramer
The best thing for you is to know how to handle these types of conditions. What can you do in these situations to get out of them and get out of them stronger than before? Here are some steps that can help you in these situations.
3 Tips to Cope with a Big Investment Loss
- Do not take any impulsive action
The worst thing an investor can do after taking an investment loss is to act rashly. This is totally humane; it can happen to anybody. So, you better keep your horses calm before making any rash decisions. Letting things and swirling emotions settle in your head will help you take better long-term decisions.
Meeting a therapist is no longer taboo and it can help you to figure out your own coping mechanism of dealing with the loss and also to put the course correction plan into action. If the idea of a therapist seems intimidating, consider talking to a family member or a friend to whom you can open up without any shame or embarrassment.
2. Asses your situation with a calm mind
Evaluate the situation in a rational manner – assess the magnitude of the loss, understand what it would take to rebuild, plan for the rebuilding stage and strategically go about it. Often the situation is not as bad as we make it out to be initially. After assessing all the factors that resulted in the loss in the first place, try to eliminate them from your life. Devise your new options about how to get back in the game. Evaluate them with a pros and cons list, then select one of the options and start your re-building process. Try taking someone professional or a relative in confidence when starting your re-building process, so that you don’t start your new journey in wrong direction.
3. Cut back on your expenses for some time and move on
Rebuilding after a financial loss requires you to fill the gap left behind. This gap can be filled in two ways – increasing the cash inflow and reducing the cash outflow. Track your expenses and find small yet impactful areas to cut down your spending. This could be eating out or entertainment or even smaller expenses like Cable TV. Know that it is a short-term measure and once your financial situation stabilizes, you can go back to integrating your preferred spends back in your life.
Nothing in life is invincible. When looked at in cool rational manner, the biggest problems including financial loss can be resolved. So, keep your head cool, evaluate your options, consult with professionals and start your re-building process with a new hope. Best of Luck!