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Wednesday
Aug102011

Financial Stress: Investors Experience Emotional Fallout

Brand X Pictures/Thinkstock(NEW YORK) -- The stock market cliff dive that began three weeks ago and reached a crescendo Monday has crushed the spirits of some investors who had been crawling back from the 2008 financial crisis.

Many psychologists say they are now trying to cope with the emotional fallout from some people who thought they were recovering from their own financial downturn.

"I liken this as the acute phase of natural disaster," said Joshua Klapow, clinical psychologist at the University of Alabama in Birmingham. "And at its core, it's psychological. Not financial."

The Dow fell more than 600 points Monday, its biggest point loss in a single day since Dec. 1, 2008 and its sixth biggest point drop ever.  While gains on Tuesday were a step in the right direction, some experts say investor sentiment may take longer to turn.

Unlike the height of the recession, where the steady worsening eased some people into an emotional lull, the market's volatile drop and influx can bring about a vicious cycle of anxiety-induced impulsive behavior, Klapow said.

"You're seeing people who may not make the soundest financial decisions just so they can do something to manage their emotions," said Klapow.  "We don't know what's going to happen right now."

Many seem to be equipped with a financial game plan during stable but bad times, said Klapow.  But instability strips people's sense of control, he said.

"Lack of control is one of the most anxiety-provoking situations," said Klapow.  "One could liken it to being diagnosed with an illness with an unknown prognosis."

The physical symptoms of financial stress and anxiety are much like that of general anxiety, and can include constant worrying, chest tightness, and nausea.

"The stimulus that's causing the anxiety is different because finances are tied to so many things," said Klapow.

For many, finances are tied to their standard of living and their quality of life; everything from their spending habits to how they use their free time.

Psychology experts say that it's a person's perception of how much control they have over their finances, not the amount of money invested into the stock market, which drives his or her level of anxiety.

The perception that a sudden loss could be life-changing -- no matter how many dollars they started with -- could trigger more intense feelings of anxiety.

Copyright 2011 ABC News Radio







ABC News Radio