Did you know there is such a thing in the stock market as the “Fear and Greed Index”?
Yes, it’s a thing.
You might also be surprised to know that the fantastical world of finance is actually pretty creative itself. Just look at option trading strategies, which are bedazzled with butterflies and iron condors! (An exploration for another day, perhaps.)
It happens that fear and greed are at the core of many very human experiences, whether in our creative pursuits or in the pursuit of wealth. That’s why today, we’re doing a primer on the actual Fear and Greed Index, and then borrowing this concept and applying it to our creative lives.
(My goodness, how niche can we get? I love that you’re here — let’s go!)
Humanizing the financial world
Aside from the creative names for option strategies, one of the things that has always intrigued me about the stock market was that the prices don’t necessarily reflect fact so much as sentiment.
That’s why I find this little index so charming — it humanizes the financial world a bit.
Happy Financial Literacy Month! If you’re new here, welcome — this is a blog about creativity, written by an accountant. While I don’t teach accounting or finance on the blog, I do like to reference them from time-to-time since they’ve been such a huge part of my life, and still inspire my writing today!
While stocks do have an underlying value that theoretically drives their price, the real ups and downs of the stock’s price are often driven by how people feel about it.
That’s why a “fair market value” calculated by a business valuator is nearly always going to be different from the “market value” that you can look up.
The Fear and Greed Index is one way to get a sense, overall, of how the market is feeling.
It does this by tracking certain indicators that signal how investors are behaving, and from there we can gauge how the stock market is feeling. It’s attempting to quantify, and make measurable, the intangible concepts of fear and greed.
Cool tool, right? But as with all tools, what matters most is how you use it.
The point of the Fear and Greed Index is to have some awareness of what’s influencing your decisions, and to find productive ways of working with that knowledge.
How the Fear and Greed Index works
The Fear and Greed Index was created by CNN Business. It tracks seven different market indicators that theoretically tell us how the market is feeling based on investor actions.
Sparing you the details (and at the risk of oversimplifying), these indicators look at what is being traded and in how much volume, how stock prices are trending overall, and how drastically those prices have been moving.
Then it assigns meaning to the results: whether investor actions are more indicative of fear, or greed.
If you are detail-curious, the Fear and Greed Index uses the following market indicators: Market momentum, stock price strength, stock price breadth, put and call options, junk bond demand, market volatility, and safe haven demand. From: Fear and Greed Index – Investor Sentiment | CNN
So, what do we do with that information?
How to use the Fear and Greed Index
Disclaimer: This is not financial advice, so please don’t take it as such.
Here are a couple of things you can do with it:
1. Use the Index as an indicator to check your own bias.
Reflect on your own thoughts and actions in the context of the Index sentiment.
In fear: Are you, too, feeling the fear? And if so, are you acting on it? For example, are you impulsively selling low out of fear, rather than strategically selling based on sound decision-making?
In greed: Are you also feeling the itch? Are you buying overvalued stocks to participate in a steep climb without doing the research and evaluating if the price really makes sense?
2. Work with the market sentiment and let it inform your decision-making.
Some investors will use the Index to support their buying/selling strategies.
There are many ways to do this. One example: If the Index is registering fear, that could suggest that stocks may be undervalued, so one might be on the lookout for buying opportunities. The opposite might be true when the Index indicates greed.
(Again, none of this is financial advice, except perhaps this one statement: do not use the Fear and Greed Index alone to make an investing decision.)
Now on to the fun bit: how can we apply this concept to creative growth?
Creating a Fear and Greed Index for your creative work
Okay — now that we know a bit about the real Fear and Greed Index, let’s apply this concept to our creative work. We’ll take a look at some possible fear and greed indicators for our creativity, and how we might use them to inform our creative work.
Why?
Because I love a good finance-creativity crossover.
Oh — why clock our sense of fear and greed? So much advice for creatives is specifically geared toward dealing with fear. It’s a core emotion that we don’t often know how to sit (or dance) with. It makes us uncomfortable, and we try to avoid it as much as possible.
When fear keeps us small, it inhibits our creative work.
At the core of fear is how important, precious, or vital our creative work is to us. It makes perfect sense that we would be afraid — in putting our creative work out there, we’re offering a little piece of our truest selves, and we have little to no control over how the world will treat it.
But what if the fear was just data?
On the opposite end is greed, and I suspect this is talked about less frequently than fear in creative circles, but I still think it helps to contemplate.
In the context of our Index, greed can push us out of our authenticity, and inevitably out of what we really need to be creating. It can cause us to trip up, to make mistakes, or to place a barrier between ourselves and the rest of our creative communities that leaves us feeling unfulfilled and uninspired.
I’m not talking about corporate greed or the greed of others — I’m referring gently to our own. A little greed in this context is healthy: it drives us to grow and expand.
It’s nice to be neutral, but as with any polarities, we can trust ourselves to oscillate from one end to the other, and back again.
Finding your fear and greed indicators
Okay, fellow creative — time to dig deep. How will you quantify your fear and greed index? Let’s pick some tangible(ish) indicators that travel on a spectrum.
Here are some ideas:
- Procrastination – Overwork.
- Muted – Loudspeaker.
- Hiding – Oversharing.
- Authenticity – Algorithm.
- Honesty – Thievery.
- Perfectionism – Lack of care.
- Complacency – Comparison.
You can borrow these or come up with your own to see how fear or greed are shaping your creative practice.
An important note: In this context, these are neither good nor bad. (Okay, except thievery – don’t steal, unless you’re Stealing Like an Artist – Austin Kleon.) I know greed comes with a negative connotation, but in this context I see it as a relentless pursuit of success which, at its most extreme, can cause us to lose ourselves in the process.
The point is to find a healthy balance between the two extremes.
Using the indicators effectively
Whether we’re stuck in procrastination (fear) or at the mercy of overwork (greed), it can feel overwhelming.
Common advice when a feeling is overwhelming? Name it. Maybe write about it. Do something to separate yourself from the feeling so that you can observe it, and its impact on you. These indicators are another way to get that much-needed separation.
And valuable information.
Because much like the investors, you can create a repertoire of strategies to help either take advantage of the energy, or course-correct a bit.
How do we do that?
1. Take advantage of fear: It could be guiding you to what matters most to you, indicating that maybe you’re onto something. That makes fear your North Star. This is also a great time to do introspective work, and to experiment in private and see what comes out.
2. Move out of fear: You can shimmy out of it by thinking (or writing) about some if-than scenarios. What are you afraid will happen? And what if that does happen, what will you do? And then what? Getting to know the fear in this way can help create separation from it and ultimately dilute it.
3. Take advantage of greed: If you’re feeling that drive, get prolific! Do lots of work. Throw spaghetti at the wall. Go public. This is an outward-facing energy that is hungry and is willing to try things and see what sticks.
4. Move out of greed: Again, get introspective and examine what it is that’s driving you. How are you defining success? What is pushing you to push your view out there? Where’s the competitiveness coming from? Getting to know your motivations will help you calm this energy down and tune back into the flow of authentic creativity.
Parting words
An important takeaway: we don’t need to eliminate fear and greed. I don’t think we can. The point is to learn how to work with them. They’re two extremes on opposite ends of a spectrum, and our goal is to:
- Identify which end we’re on,
- Understand what our position on the spectrum is telling us, and
- Act accordingly.
Oh, and when we do find ourselves with a healthy balance between the two, enjoy it.
Did you enjoy this finance-creativity crossover? (I had fun writing it!)
If so, you might also like these:
- The OG crossover: Debit This, Create That: A New Venture in Balancing the Books and the Creative Life
- From my days as a business valuator: Three Business Valuation Quotes Helping Me Tackle the Blank Page
- Inspired by my days as a treasurer: Time to Start A New Venture? Don’t Let Fear Get The Majority Vote On Your Creative Journey
- And from earlier this month: The Art of Budgeting (When You Don’t Like Numbers)
And of course, I warmly invite you to join our monthly letter, delivering creative encouragement direct to your inbox! Subscribe to the Debit This, Create That newsletter!
