How do many people invest?
Typically sparked by fear or greed, many investors respond emotionally to the market and act impulsively.
Many people get anxious about the stock market and decide to get out. In the short term, their fears may be eased, however that fear might be replaced by the anxiety of missing out on a market recovery. In 2008-09, when the global and domestic markets plummeted, some investors fled the market, just before the rebound began. They locked in their losses and then had to experience the stress of watching the markets climb after they had gotten off the train.
The other side of the emotional train is greed. Investors can have a tendency to get anxious about missing out on what they perceive as a great investment.
Investing, in many ways is counter-intuitive to our nature as human beings. The old adage still stands when it comes to investment principles. "Buy low, sell high." Unfortunately, our emotions can get in the way of that strategy.
Doctors don't operate on family members because their emotional attachment could lead to imprudent decisions. Emotional decision making can be hazardous to your wealth.
Many people struggle to separate their emotions from investing as markets go up and down. Reacting to current market conditions may lead to making poor investment decisions at the worst times.
We help our clients manage their emotions and make good investment decisions.
To learn more on science-based investment strategies, contact Private Wealth Management Group.