One of the most important books I’ve ever read was the iconic “On Death and Dying” by Elisabeth Kubler-Ross in 1997. She demonstrated that there are normal emotional stages after hearing a terminal diagnosis. It is a useful exercise.
Naturally, Dr. Kubler-Ross’s perspective on predictable emotions related to death is useful for other life events. Mark Hulbert of MarketWatch has written the very useful “Five Stages of Bear Market Grief” which are:
1. Denial – Stock market weakness is a buying opportunity.
2. Anger – Denial morphs into anger, investors rail against the unfairness of the pullback. A hallmark of this stage: investors see the pullback as a personal affront.
3. Bargaining – Investors redirect their energies to determining whether they can maintain their lifestyle, despite the hit to their portfolio.
4. Depression – Realization sets in that “cutting the fat” isn’t going to be enough; major lifestyle changes will be required.
5. Acceptance – Investors give up, viewing any sign of market strength as a sucker’s rally.