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Losing money is par for the course with experienced investors

A few weeks ago, my crypto friend (everyone has one) told me he had “dropped about 70,000 pounds”. Is what suits the middle class in London, and can probably afford to lose £ 70,000, as he has done everything from crypto over the last few years. After disassembling himself from his losses, he started talking about buying the dip, implying that he had not completely lost faith.

Of course, in the face of recent losses, he is a minnow. It’s not just crypto either. Mark Zuckerberg and Bernard Arno have lost more than $ 40 billion each so far this year, mainly as a result of a drop in shares – a loss equivalent to the GDP of Serbia or Azerbaijan. 80% in May, for similar reasons, which put him off the list of the 500 richest in the world, as calculated by the Bloomberg data group.

How do people deal with such losses? Anyone who hangs out with money for a long time copes better with it, says Brad Klanz, a clinical psychologist who specializes in wealth. They will have diverse portfolios, which means it is unlikely that all of their wealth will be wiped out in one fell swoop, and they will be happy to sit down in the fall and pick up cheap properties. Almost all of the biggest losers, caused by people in various wealth rankings, fall into this category – paper losses that will eventually be offset by paper profits.

But, for those who made millions very quickly, this may be a different story. Especially if they used debt to increase their profits – the process works the other way around when property prices go down, making the fall much worse. They can be depressed, angry, even suicidal. “It depends on how much of their ego and self-worth are wrapped up in their net worth,” Klontz says.

A complicating factor, he adds, is that those who have made their wealth this way, have often done so by ignoring the accepted wisdom: “You have learned the wrong lesson but it is a very good lesson for you.”

Studies show that men often attribute success that is primarily luck to their talent, with men tending to do so than women. The problem is, if you believe your independent genius has brought you millions, it’s very hard to shrug and say, “these are the breaks” when you lose 90 percent of it. Making someone a successful businessman can make people believe he is good at everything, especially investing.

If this sounds like a gray area between investing and gambling, it does. Tony Marini, a psychotherapist in Scotland whose areas of expertise include Gambling and financially addictive behavior, Says he sees a lot of people who started trading before they got addicted. These are usually men aged 25-40, who shut themselves off from the wider world in online bubbles in which they reinforce each other’s behavior and beliefs.

Marini saw one man, who after losing a million pounds of his money on crypto, spent £ 1.5 million of his company money in an attempt to get it back. Another gambler investor turned a family fortune of £ 180 million into £ 20 million before finally quitting.

Especially in areas like crypto and day trading, he says, “you often see people start out sensibly but cross the line into addictive behavior.” Marini, who himself lost £ 2million before recovering, says he often sees cross-addiction – where people awake all night watching the graph, drinking and taking cocaine (which like gambling leads to highs and lows).

Another problem is that the losses and pain can dissipate out. Those who feel they have found a shortcut to indescribable wealth will often recommend them to friends and family. Therefore, when everything goes wrong, along with their failure, they have to deal with the guilt of “losing” the money of their hard earned relatives as well as their money.

So what should you do? If it’s an addiction – defined as a lack of control over something you do to the extent that it is harmful – you need to seek help and support. And if it’s just a huge and traumatic loss, you have to go through it, come to terms with what happened and find a way to move on. Either way, you need to re-engage in real life and the people who matter to you.

The solutions are known, if not easy. Gerald Ratner, a British businessman who lost almost everything because An unjudged joke, Once told me that what you should not do is get stuck on antidepressants and spend your life in bed watching TV during the day. Eventually, after reading the riot by his wife, Ratner began riding a bicycle which helped him get out of the rut he was in.

Another lesson is not to shirk any risk, says Klanz. “I met someone a few years ago, who was so traumatized by the losses she made on the dot.com bubble, that she stopped investing in stocks altogether,” he says. “She sat on the sidelines for 15 years and missed the biggest bull run in history.”

Rhymer reads. . .

How high we walk in the dark By Sequoia Nagamatsu. It starts as a fairly conventional epidemic thriller. But then – through a series of linked short stories – goes to unexpected places, from euthanasia theme parks and death hotels to alien star systems 6,000 years in the future.

Follow Rhymer on Twitter @rhymerrigby

This article is part of FT WealthA section that provides in-depth coverage of philanthropy, entrepreneurs, family offices, as well as alternative investments and influences

Losing money is par for the course with experienced investors Source link Losing money is par for the course with experienced investors

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