Watching the stock market is detrimental to your financial health.
If it’s up, watching the stock market can lead to false confidence, bubbles, and castles in the air. Maybe even worse though, if it is down (like it is as I write this in late 2022), watching the stock market can lead you to sell while the market is low. Both of these actions are definitely bad for your financial health and wealth.
Why then is it just so dang tempting to constantly check and check the stock market?
I don’t know the exact reason why. But, especially recently, the stock market has become gamified. This only heightens the experience in which constant watching gives us bursts of dopamine when we see our investments go up.
The problem though is that these bursts are short lived. So, the more we watch, the more our body gets used to these short dopamine hits. Then we start to need them. So we chase them…even if it hurts our finances.
Why shouldn’t we be watching the stock market?
The answer is because you should be investing in the overall stock market passively.
Remember, by investing in the overall stock market over the long term, we invest in the overall ingenuity of humankind and the overall U.S. and/or world economy. That’s a safer bet than trying to time the market or pick individual stock winners (Impossible…remember?).
We can invest like this by investing in low cost, broadly diversified index funds. In fact, here are 5 concrete reasons that index fund investing in better than active stock picking.
When you invest passively like this, studies show that you beat active investors 80% of the time. And this is year after year. And previous active winners have been shown to be no more likely of future success than anyone else.
The Best Stock Market Explanation I Have Ever Heard
Plus you minimize taxes, fees, and transaction costs. That’s money staying in your pocket instead of the broker’s.
And, when you invest passively, you don’t need to pay attention to the stock market AT ALL except for once a year when you rebalance your asset allocation.
So, if we shouldn’t be watching the stock market, what should we be doing instead?
Top 10 things to do instead of watching the stock market
As always, from the top…
1. Review your financial plan
Whenever I am tempted to look at the stock market or adjust my investments, I just review my written financial plan.
Selenid and I wrote our financial plan without emotion. We set our financial goals and crafted a plan to reach them. This plan then becomes our treasure map…if we just follow it, we know we will reach financial freedom.
It’s extra helpful to remember this when the market is:
- Down and we feel like we need to get out of the market
- Up and we feel like we can be doing more to get better returns
The 3 Most Tempting Current Investments to Avoid
This is probably the most important function of a written financial plan in reality.
If you don’t have a written financial plan yet, you can check out mine and use it as a template here!
2. Make sure you saving enough
Growing wealth and reaching financial freedom is simple. But not easy.
The basic formula for wealth building is to grow and invest the margin. The margin is what you earn minus what you spend.
In that equation, the one thing that is 100% always in your control is “what you spend.” So it makes sense to spend some time making sure you are doing right by this variable.
For an attending physician, the minimum goal should be to save 20% of your gross (pre-tax) income. But if you can or want to do more, go for it! Selenid and I save about 40-50% of our monthly W2 income.
The best ways to review how you are doing with your savings rate are:
- Create and review a budget (download my budget template here)
- Map out your money flow like I did here
3. Assess your risk tolerance
Your risk tolerance is equal to how well you sleep when the stock market is not doing well.
You want to find an asset allocation that meets but does not exceed your risk tolerance.
If you find yourself not sleeping well in a down market, your portfolio may contain too much risk for your tolerance. Consider increasing your bond allocation.
Bonds Asset Allocation: What Should Yours Be?
If you are sleeping well and feel you could accommodate even more risk, maybe increasing your stock allocation is the answer.
But remember, you only need to increase your risk as much as needed to reach the returns you need to reach your financial goal. Increasing your risk beyond this doesn’t serve anything.
4. Binge the show Atlanta
What? I never said all of these things to do would be finance related. Sometimes we just need a distraction.
And if you are looking for something to watch, I highly recommend you check out Donald Glover’s Atlanta on FX.
Currently in its 4th and final season, I’m not even really sure how to describe this show. Part anthology and part chronological, this show will not keep you bored. And it’s one of the most mentally stimulating shows I’ve ever watched…especially on the topic of race, which it covers with incredible nuance and finesse.
5. Learn about real estate investing
The tough part about index fund investing is that we have a natural inclination to want to tinker with things. We equate inactivity with being unproductive.
It’s totally antithetical to our minds that when it comes to investing in the stock market, doing less is actually doing more. The reason why is again that the stock market is pretty much efficient.
However, the real estate market is much less efficient. So, if you are looking for an investment that you can tinker with to increase your return, real estate is a great one.
So, take some time to review these posts to help get you started!
- A Real Estate Investing Guide for Physicians
- The Real Estate Flywheel Effect for Physicians
- How Doctors Can Decide If They Are a Better Active or Passive Real Estate Investor
6. Start a side gig
There are a ton of awesome advantages to physician side gigs:
- Create passive income AKA money you make while you sleep
- Diversify your income so that a decrease in one income stream does not create financial stress
- Increase your income!
- Decrease the amount of savings that you need to retire
- Pay off your debts faster
- Invest more
- Utilize tax breaks to your advantages
- Exercise your entrepreneurial muscles
- Treat yo’ self! (Please click this link if you don’t get the reference – it’s worth it I promise!)
Rather than watching the stock market, I challenge you to start by generating just 1% of your clinical income via a side gig. It’s a great example of an undeniable way that 1% returns will make you wealthy.
There are a ton of options for physician side gigs that you can explore here.
7. Evaluate your practice for income potential
However, clinically is where most of us will look to increase our compensation. It’s where most of us make all or the majority of our money. So it makes sense. And we should spend some time thinking about how we can improve this compensation.
How can we do this? Here’s a though experiment:
In your job, think about what you do. What is your role? What tasks are your responsibility? How do you create value for your employer or your business?
Now, think about how many other people do that same thing or can do the same thing as you.
If the answer is “a lot,” then you want to change this.
In your current position, you have no leverage or power. If you ask for a raise or take more money our of your business as the owner, you’ll be in trouble. Your boss will just look for one of the many other people who can do your job and will do it for your current compensation. Or your business customers/patients will just go to one of the many other providers offering the same services for less. Either way, it’s not good for you.
So, you need to focus on altering or evolving or adding to what you offer. Make it more unique. Create more value. Build new skills. Move to a new area.
Ultimately…make it so that you are doing something that very few other people are doing.
- Actively acquire new skills or accomplishments to add value in ways that few others can
- Highlight those unique skills that are rarely possessed
- Seek opportunities in need of these rare value-adding skills and accomplishments
- Negotiate aggressively
Here is a full guide to increase your compensation clinically and non-clinically.
8. Read a book about the stock market
I’ll admit it. Even I’ve gotten itchy in the past and wondered if I should be doing something more active with my stock market investing.
Like I said before, it’s a normal human inclination to want to tinker.
Often, what I have done in these cases is read a book about the stock market. Doing this helped me to understand even better why a passive investing approach is superior to an active one. The books also gave me a greater understanding of the stock market to articulate my own investing strategies. And they were just good interesting books to boot.
My top recommendations are:
- A Random Walk Down Wall Street by Burton Malkiel
- The Coffeehouse Investor by Bill Schultheis
- The Psychology of Money by Morgan House
Try to just read 10 pages a day to start!
I really need to exercise more. So this makes the list by serving also as motivation for myself.
We are always going to be too busy for exercise. But it should be a habit. And remember, it takes roughly 66 days for a habit to form.
So, each time you are tempted to watch the stock market, maybe exercise instead?
Seriously, if you have good exercise habits, tell me how you got started in the comments or via email!
10. Buy something intentionally
I wanted to end with this one. Intentional spending is the concept that one is intentional with the money that she or he spends. Meaning that any purchase is well thought out and carries an intended purpose.
The simple formula to practice intentional spending is:
If a purchase meets both of these criteria:
- The purchase fits into your financial plan and
- The joy derived from the purchase is >/= the dollar value of the purchase
If the purchase meets either of these criteria:
- The purchase does not fit into your financial plan and
- The joy derived from the purchase is < the dollar value of the purchase
The reason that I include this here is to serve as a reminder that it is okay to spend money. So long as it is done intentionally. Meaning that you can still reach your financial goals and the joy from the purchase is greater than the price tag.
Too often, we all (oh yes…definitely including me) can get too squirmy about spending any money. But money is just a tool to bring ourselves, loved ones, and the world joy. It’s not a bad thing to spend it on ourselves or others when done the right way.
So, maybe spend some money intentionally instead of worrying about the stock market!
More on this concept can be found here.
And there you have it…
Investing in the stock market is a marathon, a long game. Watching the stock market on any frequent basis at best wastes our time and at worst can lead to financial mistakes.
I hope these 10 things to do help you the next time you feel this urge the same way that they have helped me!
As physicians, our time is important, so let’s not waste it!
Exploring the Time Value of Money for Physicians
What do you think? Have you ever caught yourself watching the stock market? Was it a good or a bad thing? Anything you think we should add to this list? Let me know in the comments below!