“I‘ve now lost 60% of my portfolio and don’t know what to do. Should I cut my losses? Or wait it out?? I worked all summer to accumulate 2k and am honestly devastated to have lost it all. I lost my appetite and all I do is watch mu charts (sic) hoping it’ll go my way the next day,” a user wrote on Reddit last year.
His stock didn’t bounce back, and the 23-year-old Illinois native’s life plunged into a cocktail of depression and anxiety.
“I didn’t know how to get out of it,” he told Re:Set asking that he remain anonymous. “It’s embarrassing also, as you see friends, people on television make so much money in the stock market, but you can’t. In addition to losing the money, I felt like a failure as well.”
The internet is full of anecdotes similar to his. Another trader wrote about how he lost $75,000 USD of precious family savings and dropped 10 pounds in a matter of weeks, in addition to sleep deprivation, tightness in his chest, headaches and lethargy, all from the guilt of losing the money. While an 18-year-old spoke about how he started to get depressed and contemplated suicide after taking some losses.
Getting in young
The reckoning for the discourse about mental health and stock trading came last year when Alex Kearns, a 20-year-old student at the University of Nebraska, died by suicide. He had started investing on the trading and investing app Robinhood when he was a teenager. He poured his life savings which consisted of birthday gifts and money saved from his summer job lifeguarding into investments through the app that lets people without prior experience invest, and has been criticized for its advertising practices targeting amateurs.
Some time after he started investing, Kearns made a bad trade, and the app restricted his account, while showing a negative balance of $730,000 USD. On that balance, it demanded $170,000 of that be paid shortly. He believed this was an error and needed to be corrected by the app. Not able to reach a customer service provider, Kearns died by suicide. On the same day, Robinhood replied to his email saying that he didn’t owe them any money as the confusion had been settled.
“The stock market affects how investors feel, and in turn their feelings affect the markets. In this way, the relationship between our mood and the stock market are a bidirectional one,” Lin Sternlicht, a New York-based addiction specialist, told Re:Set.
Anxiety, she added, can trigger selling the stock, and in turn selling can further trigger more anxiety. Conversely an upward trend in the market can trigger a positive mood and states of euphoria resulting in continued market growth.
“Our actions are intrinsically determined by the way we feel and money can have a significant role on our mood, simultaneously resulting in our emotions playing a central role in our decision-making process,” she said. “Market volatility can trigger mental health issues such as anxiety and depression.”
Trading and gambling
The biggest hazard here isn’t long-term investing where one plants money into a stock and doesn’t look at it for a number of years, but intraday/day trading, where one buys and sells the same stock/security within a single day. A 2017 study found that this type of excessive trading is similar to gambling.
“Market volatility can trigger mental health issues such as anxiety and depression.”
This fits in with research on the long term effects of the stock market on a person’s mental health. A study conducted by researchers at Oxford University over 10 years between 1998 and 2009 analyzed the Taiwan Stock Exchange Capitalisation Weighted Stock Index (TAIEX). They found that a 1000-point fall coincided with a near 5% daily increase in hospitalizations for mental disorders. Another study found that the 2008 economic crash “reduced wealth and increased feelings of depression and use of antidepressant drugs, and that these effects were largest among respondents with high levels of stock holdings prior to the crash.”
Sternlicht explained that confidence in the United States economy is highly correlated with satisfaction of personal life, which is one measurement of one’s mood. Such a financial downturn, she said, can result in a low mood and result in feelings of sadness and depression.
Now, younger men are entering the markets at much higher rates and those trading at Robinhood like to trade way more than those using traditional platforms. About half of their users are first time traders, with the median age of 30. And this is spreading to other countries.
In India, for example, brokerage firms and apps like Zerodha are offering commission-free trades to attract novice traders. This is coinciding with an investment content boom, with creators on YouTube and Instagram giving free investment advice to young Indians. Zerodha continues to grow, despite glitches in the app, with users posting on social media that it’s showing incorrect losses in their portfolio.
The procedure to educate young people off the pitfalls of trading through apps which can glitch randomly, according to Sternlicht, is mindfulness. “I would encourage adolescents and young adults to be mindful to the negative psychological impact that the markets can have on individuals, especially since young adults are already experiencing high rates of depression and suicide compared to other age groups,” she said.
Also read: How Sports Fandom Influences Mental Health