Denise Shull on the psychology of finance

Denise Shull, ReThink Group CEO, joined Yahoo Finance's Jen Rogers, Myles Udland, Rick Newman, and Akiko Fujita to discuss the psychology of finance and how to navigate market volatility.

Video Transcript

JENNIFER ROGERS: Do you watch "Billions"? Well. If you do, Denise Shull is, she's got a character based on her, Wendy Rhoades. She is also the CEO of the ReThink Group. So you help athletes, directors, traders try and optimize the psychological side of risk. And we live in a risky time right now. We're all trying to figure out how to better manage risk. I want to know in these last eight weeks, what was the nu-- did you work with traders? And what was the number one issue for them?

DENISE SHULL: Definitely worked with traders. And the number one issue is staying with their conviction. Or like, conviction is the word that the hedge funds use and the investors use. And confidence is the word that the traders use. Like, but they're really talking about the same thing, right? They're talking about that sense of what's right and that sense of what's going to happen.

So what I saw through the most volatile periods is that people who I could get them centered in what they believed did the best. It was if they deviated from being provoked from all that crazy market action and either deviated from their original plan or-- well, this is also deviate-- but like, take someone else's trade, those things never work out.

So you lose the money, and you're mad at yourself, where if they could stay convicted or stay competent in their trade and execute on that, then even if it didn't work out, like it doesn't have the sort of debit to your mental capital-- well, it's like, OK, sometimes I'm wrong. And it was easier for people to regroup.

JENNIFER ROGERS: How do you do that? I mean, did you see people like, literally, when we were bottoming out, are they calling you and saying, Denise, what do I do? How do I keep my conviction? I mean, for regular people, even, how do you-- how do you actually keep your conviction when it comes to timing the market, which we say, oh, it's like, impossible to time the market?

DENISE SHULL: So here's the superpower that's ironic. And it's being able to answer the question, what am I feeling, and why am I feeling it and get the answer right? Do it over time so you get to know yourself. People think, you know, take the emotion out of it. Well, first off, like, you literally can't do that, that the decision time shows you have to have emotions to make a decision.

And every decision has two tracks. It has the analytic piece or whatever your system or approach strategy is. And then it has the how much do you believe it? And how confident are you in it? Well, you can get organized about understanding that second half of it. So, I mean, I didn't have like, new people out of the blue call me up and say help.

I mean, we did actually get a lot of incoming calls. You know what. I sort of take that back, because I didn't get those. But my team did pick up a lot of new clients in the past six weeks or so, come to think of it. But for my regular clients, it's helping them be able to answer that-- what am I feeling and why?

So they know also when they're getting drug off track. Or they can, you know, they know what their core-- I spent a lot of time on the phone sort of asking questions, knowing what the person's core conviction was but not-- I don't want to tell people what to do. So I'd be like, asking questions so they'd remember that what they have said like, last week. But it's teaching people how to answer that question, what am I feeling and why, as it relates to their confidence in any decision, really.

RICK NEWMAN: Hey, Denise, Rick Newman here. So we're in a time when terrible things are happening to people that they can't control. So in your business, you're dealing with some things people can control, but also some things people can't. It might be a huge loss you could not have seen coming. But, you know, look at all the people losing their jobs and their livelihoods. What is-- I mean, this is a complicated question. But what is the best way to react if you've just been completely knocked over, and you don't even know what to do next?

DENISE SHULL: Not be judgmental of yourself and your feelings. Like, this is a time where there are things to mourn, whether you know someone who's passed or you lost your job. Like, if this is ever a time, this is the time that, you know, sadness is a part of this, sadly or unfortunately. And we've been taught so much to try to stay positive. But what the research actually shows is when you can put even the most negative, uncomfortable feelings into words, they become less overwhelming, less disruptive.

You can say like, I'm so sad or I'm so afraid and just respect that in yourself with no judgment. And actually like, going inward and doing that will lead you maybe to what you can do, whereas if you try to shove it aside, it just doesn't work. It comes out in other ways. So there's this irony of like, being able to be-- it's called negative emotion differentiation if you want to get scientific, but being able to differentiate amongst fear, frustration, sadness. It's actually a skill.

JENNIFER ROGERS: Skill we all have to work on of what am I feeling and why? Something that it's a tough question to answer sometimes. But Denise Shull, thanks for joining us and talking to us about your strategy and your work during the pandemic and just the last few months-- appreciate it.

DENISE SHULL: Thanks for having me.