Posted by Lending Club :: October 5, 2007 @ 9:31 am

That might be a symptom of being human.

It's a very strange feeling when you start investing---any small change in the market can make you afraid you are going to go broke. The smallest drop in your stock or fund might send you running to the hills.

Unfortunately, this is the same feeling that creates unsuccessful, stressed-out day traders. Some people get so involved in their stock choices that they ruin their relationships with their families and friends, just for the sake of following the stock market.

This effect is well known, just check out the fear-of-loss effect. Almost all people are much more afraid of losing money than they are optimistic about gaining money--even in ways that don't make sense. The book highlighted in the above link includes some studies concluding that human beings can be completely irrational about financial matters.

The easiest way to soothe these fears is just to look at the facts. The Dow Jones Industrial Average generates an average return of nearly 11%. Long-term investors in index funds can expect similar returns over their life span. The market continually corrects itself, jumping and falling, but it always seems to make great returns in the long run.

Being super anxious about your investments can be debilitating, but the fear starts to wear off after a while. If you are relatively young, adopt a long-term perspective to investing. Review your investments quarterly and make any course corrections you need to, but don’t watch your accounts on a daily basis. Lending Club loans offer a stable alternative to the stock market, so you might want to consider adding some P2P loans to your overall portfolio.