When the World Feels Like It’s Falling Apart – Big Mistakes to Avoid

Mental health experts are pretty much in universal agreement that the human brain begins working differently when a person is under stress. This is undeniably happening right now with the stressful times we’re currently facing. But when we let stress make decisions that can affect our future, especially when it comes to finances and our long-term goals, this can be dangerous. 

“Stress is going to make investors less of who they are, an impoverished version of themselves,” says Peter Sokol-Hessner, a cognitive neuroscientist at the University of Denver. “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.” 

The last four or five weeks have certainly served up plenty of stress for us all. A global pandemic (COVID-19) launched concerns regarding our health, while financial market reactions to the pandemic add another entire dimension fertile for worry and stress. 

Our team of professionals here at Linscomb & Williams has been busy over these weeks, fortunately working at full strength under our business continuity protocols (a reminder that good planning and preparation do indeed pay off). While much of our work entails having frequent conversations with clients, we have nonetheless had opportunity to compare notes among ourselves, and summarize some of the questions we are getting from clients and friends. 

These questions remind us that during times of stress like these, it is highly important to avoid making the really big, permanent mistakes that will likely inflict profound long-term damage to your planning and financial future. Someone famous (we cannot remember who) said something to the effect of: “During periods like our current one, it’s very easy to doubt our beliefs and believe our doubts.” We want to guard against being guilty of such a mental lapse, and in that spirit, we compiled a list of what we judge to be the 3 biggest potential financial errors one can make when under stress. 


Have questions? Contact the Linscomb & Williams team. We’re here for you and ready to talk!


Error #1: Listening to ‘Noise’

Thanks to search engines, social media, 24/7 financial news, cable TV and all of our electronic devices, it is almost impossible to disconnect from the incredible volume of financial noise. But we must understand that a lot of “journalists” and others who produce and circulate media content properly view the current environment as an amazing opportunity to gain audience share and a following by gathering “experts” and disseminating information. There is nothing like fast-moving financial markets to grab the attention of the public.

Unfortunately, the vast majority of information that is circulated in this kind of environment is not actionable. In other words, it is not thoughtfully specific to your personal long-term goals and objectives, with full consideration to all the variables that are unique to your own individual situation. If you are working with a seasoned and experienced fiduciary financial advisor that has your best interest at the forefront of the recommendations, your advisor can serve you well as an appropriate filter to find your way through the current dust storm of financial opinion circulating in the virtual world.

Error #2: Making Sudden Adjustments to Your Investment Policy

Your investment assets have likely declined in value during this COVID-19 bear market. Should you make any radical adjustments?

Hopefully, your investment posture was constructed with thoughtful planning around your long-term financial goals and needs. If so, the investment mix was likely stress-tested using techniques such as Monte Carlo analysis or historical simulation to confirm that you are positioned to sustain your capital through downturns like this one. (As we compose this blog, on March 26, 2020, the U.S. equity market has declined from the high point to a low point that was about 35 percent off the high, which makes this still actually less than the average bear market. Not to say, the pain is not still palpable.) But as we mentioned in the introduction, the feeling of stress can lead to making poor decisions that inflict real long-term damage to your chances of attaining your goals.

If your investment plan is well-conceived and properly tested against market downturns, then for most people, it would likely be a grave mistake to suddenly abandon ship, selling your investments to cash, simply because they’ve temporarily declined in market value. 

Sometimes, a market downturn may cause you to re-assess whether you overestimated your emotional tolerance for downside volatility. If so, then the appropriate conversation with yourself, or your advisor, might be whether you should simply adjust your investment policy to one notch lower on the risk ladder. 

Perhaps your portfolio was invested in 60 percent stocks and 40 percent bonds. Re-calibrating your investment policy down to something like an even 50/50 split between stocks and bonds might still attain your long-term goals, though possibly with a little better sleep at night. Consider that this adjustment might be the equivalent of flying lower in altitude at a slower speed, but with smoother air along the way.

Error #3: Sticking Your Head in the Sand

In our 49-year history of working with clients, we’ve seen people at times like now occasionally make the mistake of thinking, “I’ve got a solid long-term plan; I don’t need to think about this or do anything.” That might be categorized as over-confidence. Here are a few possible things to think about in the midst of a market “storm” that can serve to improve your long-term outcome:

  • If you’re living off your portfolio assets and have sufficient emergency funds separate from your portfolio, consider living for a few months off this emergency fund to take pressure off your portfolio while prices are down.
  • If you can modestly curtail spending and reduce withdrawals from your portfolio, this is just as beneficial as investing cash into the market while prices are down. Deferring lump-sum portfolio withdrawals for big-ticket expenditures (car replacement, major vacations, etc.) can greatly improve your long-term outcome. 
  • If you have excess cash beyond reasonable short-term needs sitting in low-yield investment accounts, it is certainly a good time to consider whether these should be added to your long-term portfolio assets. The best time to invest is when prices are discounted. 
  • If you have the flexibility (and the cash available) to speed up regular systematic investments, like 401(k) contributions or college savings plans, there is possibly no better time to do so than during a market decline.


Mistakes like those above can be costly and damaging to your overall goals. Consider the path to your financial future as a roadmap, with a thoughtful course created on how to best reach your ultimate destination – retirement. If you come upon a major roadblock, it doesn’t make sense to abandon your plan and hastily make the decision to change course. You’re better off taking a breath, evaluating your plan and making necessary adjustments that will help you continue your journey to the place you want to ultimately end up. 

If you want to discuss your financial plan and how these uncertain times have affected your situation, contact us. We’re here for you.

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J. Harold Williams, CPA/PFS, CFP®

J. Harold Williams, CPA/PFS, CFP®

J. Harold Williams is Linscomb & Williams' Chairman.

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Investment Advisory Services are offered by Linscomb & Williams, an SEC registered investment adviser, and a subsidiary of Cadence Bank. Linscomb & Williams (L&W) provides financial planning, investment management, and retirement plan and investment consulting services. L&W is not an accounting firm, and does not provide tax, legal or accounting advice.

Information expressed herein is based upon opinions and views of L&W and information obtained from third-party sources that Linscomb & Williams believes to be reliable, but Linscomb & Williams makes no representation or warranty with respect to the accuracy or completeness of such information. All opinions and views constitute our judgments as of the date of writing and are subject to change at any time without notice.