When markets crash, your mental health can too—here’s what you need to know

Key points:

• Stock market losses directly impact investors' mental health, increasing prescriptions of antidepressants and therapy visits.
• Losses affect investors psychologically more strongly than gains, particularly among those aged 45–64.
• Practical strategies like diversification, maintaining a long-term perspective, and seeking support can significantly mitigate emotional stress.

In a year marked by sharp market swings, geopolitical drama, ongoing trade wars, and relentless volatility, even the steadiest investors might have found themselves feeling anxious, stressed, or downright miserable at times. Perhaps you’ve experienced the heavy feeling in your stomach when you check your portfolio after a particularly bad day, or the restless nights spent wondering whether you should sell, buy more, or just stop looking entirely.

New research has now shown that this anxiety isn’t merely imagined—stock market losses have tangible, measurable effects on mental health. A recent study titled “Stock Market and the Psychological Health of Investors” by Chang Liu and Maoyong Fan (2024) has provided compelling evidence that investors’ psychological health significantly worsens when their portfolios decline, especially in prolonged market downturns.

More than just numbers on a screen

The researchers analysed comprehensive medical records of millions of American investors and found that antidepressant prescriptions and psychotherapy sessions surged notably during periods when the stock market declined significantly. For example, a one-standard-deviation drop in local stock market returns led to an average increase of around 0.42% in antidepressant use. When markets crashed hardest, prescriptions spiked even more dramatically—revealing just how deeply connected our financial and emotional lives really are.

Notably, this wasn't just a result of general economic gloom or broader financial uncertainty—this was specifically linked to personal financial losses. Investors were directly impacted mentally by declines in their own portfolios, even if their jobs, wages, or the wider economy remained stable.

Why losses hit harder than gains

An important finding from Liu & Fan’s research is that investors are much more psychologically impacted by losses than gains. This aligns perfectly with behavioural finance theories around loss aversion—our human tendency to feel the sting of a loss far more acutely than the satisfaction of an equivalent gain. Simply put, losing EUR 1,000 hurts a lot more than making EUR 1,000 feels good.

Interestingly, this effect was most pronounced among middle-aged and older investors (aged 45–64). This makes sense, given that these age groups typically have larger portfolios and often view their investments as critical to retirement plans or other significant life milestones. A stock market crash isn’t just a setback—it's a threat to future plans, hopes, and security, magnifying its emotional impact.

Not irrationality, just human biology

The reality highlighted by this research is clear: if you’ve felt especially anxious or downhearted during recent market turmoil, there’s absolutely nothing irrational or weak about it. Market losses cause real stress, and this stress can translate directly into measurable psychological strain. To put it metaphorically: losing money on your portfolio isn’t like dropping a biscuit—it’s more like losing a beloved family heirloom. It’s emotional, it’s personal, and it deeply affects your mood.

Given the turbulent markets of 2025—dominated by trade wars between the US and the rest of the world, tariff escalations, geopolitical tensions, and multiple episodes of significant volatility—many investors have experienced precisely what this research captures. Headlines about “Market meltdowns” or “Trade war tensions” aren’t just news stories; for many, they represent very real threats to their mental wellbeing.

What can you practically do about it?

Awareness, as always, is the first and crucial step. Recognise and acknowledge how financial stress affects you emotionally. Here’s some practical, evidence-based advice that can help you manage the psychological toll:

1. Don’t react in the heat of the moment
Avoid making large financial decisions when emotions run high. Our worst decisions often come from panic or anxiety, not rational thought.

2. Stick to your long-term investment plan and diversify
If the volatility has been too much, it might indicate your portfolio isn't as diversified or balanced as you thought. Diversification doesn’t just protect your money—it protects your mental health too.

3. Talk to someone—anyone
Seek expert insights and analysis if you’re unsure about your strategy, or simply talk with a trusted friend or family member. Speaking openly about your anxiety often helps you feel more grounded and less isolated.

4. Remember you’re not alone, and markets have historically recovered
Markets have historically always bounced back—even after steep falls. Patience and a long-term perspective help protect not just your money, but your mental wellbeing too.

“Mental health is the real wealth”

This compelling research is a stark reminder that behind every stock chart and market statistic is a human being with hopes, fears, and real-life stresses. If 2025 has taught investors anything, it’s that investing isn’t just about returns—it's also about resilience, emotional intelligence, and wellbeing. As the saying goes, "your mental health is your real wealth". By understanding this powerful connection, we become not just smarter investors, but healthier, happier people too.

So, if you’ve felt the stress of this year's market volatility, know that you’re not imagining it—it’s genuinely hard. But equally important, know this: the stress you feel today won’t last forever. Like the markets, your emotional resilience can and will bounce back with time.

Until then, breathe, diversify, talk it out—and hang in there.

This article is based on the research paper “Stock Market and the Psychological Health of Investors” by Chang Liu and Maoyong Fan (2024).