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Markets are kicking into high gear after a sleepy summer. It’s time to get your head in the game.

Investing is largely mental, after all. Markets are constantly changing, and your ability to process and adapt to change can make or break your portfolio. Yes, even if you pick stocks like a pro.

Don’t get intimidated, though. It’s you versus your brain’s natural tendencies, but you can work to overcome them with a little bit of effort and intention. Here are five fall-focused mental hacks that can help you tame your emotions and potentially strengthen your portfolio (and your mojo) for what comes next.

Chunk It up: Hyperbolic Discounting

The hot vax summer is wrapping up. You’ve got a long list of things to do, and summer vacation is almost over. If you’re feeling overwhelmed, you’re not alone. That’s how some people feel when they start investing: so much information, so little time. In these moments, you might be tempted to forgo long-term payoffs for short-term rewards — that’s the bias called hyperbolic discounting.

Chart titled Time Is Critical in Investing tracks the compounding effect of investing early. Investing $20 a month starting 20 years ago could value at $11,780 today, whereas $20 a month starting 10 years ago could value at $3,659 and 5 years ago at $1,470. Based on $20 contributions per month and an 8% average annual return. Source: Ally Invest, Standard & Poor's

Solution: Starting early is tough, but it can be smart in both life and investing. And if you think about future (say, retired) you, you’re actively working to beat hyperbolic discounting (when you ignore a larger long-term payoff for short-term rewards). Don’t get analysis paralysis. Break your big decisions into smaller ones, and tackle those small goals (a method calling “chunking it up”). That could mean investing a little at a time or starting to explore that stock you’ve always wondered about.

See Beyond the Swings: Risk Compensation

Stocks have been unusually quiet lately (with some bumps here and there). That’s a typical summer in the market. But people are getting back from the beach, which often leads to higher volumes and more swings. September is the S&P 500’s worst month on average (since 1950), and October has been the stock market’s most volatile month.

Chart titled The Worst Month, According to History tracks the S&P 500’s average return by month since 1950. The lowest averaging month is September at –0.5%. The others are as follows: January (1.1%); February (0.0%); March (1.0%); April (1.6%); May (0.2%); June (0.1%); July (1.1%); August (0.0%); September (-0.5%); October (0.8%); November (1.7%); and December (1.5%). Source: Ally Invest, Standard & Poor's

Plus, investors seem a little extra nervous about the prospect of slowing economic growth and a pandemic resurgence these days — which can also bring risk aversion. Put it all together, and we could see a quick pullback break the calm.

Solution: When stocks slide, try cognitive reframing. Sure, your investments may be dropping, but wise investors view pullbacks as stocks on sale instead of times to panic. Why? Because markets go up and down. It’s the natural rhythm of investing. That’s why the S&P 500 has clocked 8% average annual returns since 1950, even after enduring 32 bear markets and corrections. Your brain’s risk compensation may tell you to run, but the risk could end up working in your favor.

Check Your Confidence: Dunning-Kruger

Stocks have hit plenty of record highs this year. So has hubris.

Watch your ego, though because overconfidence can sabotage your portfolio. It’s a dangerous mindset that often leads to excessive risk-taking and unnecessary trading (a.k.a. the Dunning-Kruger effect). Market history is littered with investors whose portfolios blew up from risky, leveraged bets.

Plus, this market environment has been especially unpredictable. We’ve seen the pendulum swing from growth to value and back to growth this year. With an uncertain economic outlook (and no crystal ball), it’s tough to know which markets or sectors will do well going forward.

Chart titled “Best-Performing Asset Classes From 2001 to 2020.” 2001 (Housing, 8%), 2002 (Long-term Treasuries, 17%), 2003 (International Stocks, 41%), 2004 (Small-cap Stocks, 23%), 2005 (International Stocks, 17%), 2006 (International Stocks, 27%), 2007 (International Stocks, 17%), 2008 (Long-term Treasuries, 24%), 2009 (International Stocks, 41%), 2010 (Small-cap Stocks, 26%), 2011 (Long-term Treasuries, 30%), 2012 (International Stocks, 17%), 2013 (Small-cap Stocks, 41%), 2014 (Long-term Treasuries, 25%), 2015 (Housing, 6%), 2016 (Small-cap Stocks, 27%), 2017 (International Stocks, 27%), 2018 (Housing, 4%), 2019 (Large-cap Stocks, 31%), 2020 (Large-cap Stocks, 18%). The chart represents the asset class with the highest returns among these five classes: Large-cap Stocks, Small-cap Stocks, International Stocks, Long-term Treasuries and Housing. Large-cap Stocks are represented by the S&P 500 (including dividends). Small-cap Stocks are represented by the S&P SmallCap 600 (including dividends). International Stocks are represented by the MSCI All-World Country Index ex-U.S. (including dividends). Long-term Treasuries are represented by the Bloomberg Barclays Long-term US Treasury Total Return Index. Housing is represented by the Case-Shiller 20-City Housing Price Index. Source: Ally Invest, Bloomberg

Solution: Do your portfolio a solid and consider rebalancing by taking some money out of one asset class and putting it into another asset class. It’ll help you lock in your gains and keep your risk in check. Don’t rely too much on market timing and avoid trying to guess what tomorrow holds.

Markets can change quickly, and things that work today may not work tomorrow. Different sectors and markets can top the chart as time goes on, depending on economic conditions, political events, regulatory changes and unforeseen events.

Watch the Peer Pressure: Bandwagon Effect

Raise your hand if you’ve traded a meme stock this year! You’re likely in good company. About one out of every four of our customers were buying and selling meme stocks at the height of the GameStop short squeeze.

Social-based investing has been all the rage, and chances are it’s not going anywhere any time soon. There are benefits to investing with the crowd, but it can be a tough game to play. Investing with the crowd inherently ignores one of the wisest investing practices: goal-setting. Everybody has an investing goal in mind – even if they don’t want to admit it – and that goal is the starting point for all of your investing decisions.

Solution: Find your purpose by starting with honesty. Determine your why. Investing to make money can be the why, but its lack of purpose can lead to weaker hands when times get rough. Plus, having a time or price target for your investments can help you decide when it’s time to buy or sell a position. Let the numbers guide you, not your emotions.

Read more: A Millennial Investor’s Perspective on Tackling Debt and Setting Goals

Get Your Head out of the Sand: Ostrich Effect

Bad news happens. And when it does, it’s easy to shove your head in the sand and ignore the world. As an investor, it’s important to stay abreast of what’s going on but not to dwell too much on one story or piece of data. It’s a delicate balance.

Solution: Stay educated and know how changes impact the stock market. A growing economy tends to favor more conservative assets like stocks, especially when the Federal Reserve is keeping policy extra supportive.

Learn to digest each headline based on what it could do to your own portfolio and goals, not somebody else’s. If you’re a long-term investor looking several years into the future, 99% of headlines probably won’t impact your ability to reach your investment goals. Most of them are just little speedbumps on your journey.

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Headshot of Callie CoxAs senior investment strategist for Ally Invest, Callie Cox helps educate Ally Invest customers about the financial markets through engaging content and strategic initiatives. Callie has worked in financial research for her entire career, with stints at LPL Research, TABB Group and Bloomberg. Her work has been featured in Bloomberg, the Financial Times, Yahoo Finance, and Barron’s (among other publications). You can also find her on Twitter at @callieabost.


The opinions expressed here are not meant to be used as investing advice. For more information, visit our website.