Market Volatility Is Wrecking Your Health

The pressure is enormous. Stress is running high. Emotions are probably taking over.

For investors, that's all thanks to the latest jerky, roller-coaster moves in stocks...

In times like this, it's easy to lose control.

Don't.

Not only will uncontrolled emotions wreck your portfolio... they'll wreck your health, too.

This is according to a study from the American Economic Association that focused on the link between stock market fluctuations and health outcomes. Researchers found that just a 10% drop in wealth during a two-year period corresponded with a 2% to 3% standard-deviation change in four measurable health factors:

• Physical health index​
• Self-reported health​
• Mental health​
• Probability of surviving the next two years​

That's why, to prepare for any changes in the market that might come our way, we need to prepare both financially and physically. Below are three steps you should take today...

Step 1: Have a plan.

You can keep the inevitable losing trades from wrecking your portfolio with two simple (and easy) methods: Use stop losses and follow proper position-sizing advice.

We regularly recommend you use 20% or 25% stops and honor them no matter what. Similarly, we "position size" by recommending that you never put more than 4% to 5% of your portfolio in any one investment recommendation (like a single stock or bond).

The combined strategies of trailing stops and smart position sizing ensure you never lose more than about 1% of your portfolio on any one investment...

Step 2: Spread out your wealth.

I've written many times about the benefits of asset allocation. Distribute your portfolio among different asset classes – stocks, fixed income, cash, and chaos hedges (like precious metals). Keeping your wealth stored in a diversified mix of investable assets is the key to avoiding catastrophic losses.

You also need to consider something called correlation.

Correlation is a statistic that measures the degree to which two stocks, or sectors, move in relation to one another. Any correlation must fall between negative 1 and positive 1.

Positive correlation means the two assets move in the same direction together. For instance, when the price of fuel increases, so do the prices of airline tickets. Negative correlation means the assets move in opposite directions. For example, if stocks fall, gold tends to rise.

Step 3: Make time to reduce stress.

We like to balance our health and wealth recommendations for a simple reason: to help you live a well-rounded life. It's important that you stay healthy in retirement so you can enjoy your hard-earned wealth.

That's why our third step here is to take care of yourself. Stress reduction leads to better sleep and better cognition. In turn, you make better, more informed decisions and are less likely to give in to emotionally charged news stories about a pending crash.

Some of my favorite ways to calm anxiety and lower my stress include:

• A quiet cup of tea (I like the Bigelow brand)
• Meditation
• A nice 30-minute walk
• Improving sleep hygiene
• Listening to music (classical helps me focus)

Try to work one or all of these tips into your daily routine for a better, more focused outlook. Calm investors are better investors.

And there has never been a more important time to remain calm than right now...

As President Donald Trump's "Liberation Day" tariffs (and the retaliations they spark) continue to ricochet through every part of the financial markets, this could be just the beginning of the panic selling.

But don't let all that noise distract you from what Elon Musk's Department of Government Efficiency ("DOGE") is doing.

Last night, Professor Joel Litman and Rob Spivey (both from our corporate affiliate Altimetry) hosted a special event where they explained why you need to get ahead of the next big event to hit the stock market:

• They took attendees "behind the scenes" at DOGE – with a trusted inside source (a 25-year government veteran) – to show what's really going on in the corridors of power.
• They detailed how DOGE's next move, which launches May 1, will surprise everyone and have dramatic consequences for the stock market.
• And they unveiled four specific stocks that should flourish in this next era of investing.

You can catch up on everything you need to know – for free – right here.

Now, let's get into this week's Q&A... As always, keep sending your comments, questions, and topic suggestions to feedback@healthandwealthbulletin.com. My team and I read every e-mail.

Q: Thanks for the info on stop losses for options. Could you also do an example for puts that are sold? I've been having a hard time wrapping my head around that one and I have some put options that I've sold on my own that are down quite a bit. – M.C.

A: Thanks for the question, M.C. In case anyone missed it, here's what we wrote a couple of weeks ago about calculating stops for covered calls.

Today, let's look at how we calculate stop losses for puts. (For readers who aren't familiar with options trading, a put is a contract in which you agree to buy stock at a certain price.)

Say you sell June $25 puts on stock XYZ and you collect a premium of $1. Selling a put option for $1 with a $25 strike means your capital at risk is $2,400 (recall each option contract represents 100 shares). Capital at risk is the amount of money you'd owe if you had to buy shares of XYZ.

Here's where things change from covered calls... This time, we want to look at the maximum amount we'd be willing to lose per option. Using the same 25% stop loss, that would be $6 ($2,400 multiplied by 25% and then divided by 100).

But remember, when you first sold the put, you received $1 per option. That's your money to keep, and it raises your stop to $7.

To ensure you lose no more than $6 per option, you would buy back the puts, to close, if the option price increased to $7.

What We're Reading...

• Did you miss it? The answers to the tariff test are coming.
• Something different: Can this smell test alert you to early cognitive decline?

Here's to our health, wealth, and a great retirement,

Dr. David Eifrig and the Health & Wealth Bulletin Research Team
April 25, 2025