Don’t Let Emotion Derail Your Financial Plan
Emotional Investing Traps to Avoid
Overreacting to the News
You only have to watch the headlines for a few minutes to know they can spark worry and doubt. Acting on the impulse to make portfolio changes based on current events can easily hinder a sound long-term financial plan. Having an experienced investment advisor on your side can calm your fears and remind you of the big picture.
Keeping Up With the Joneses
Envy can persuade you to purchase things and live a lifestyle above your means. If you are constantly trying to keep up appearances or must have the latest and greatest gadget, then excessive debt and lack of savings will thwart your financial plan before it has a chance to start.
FOMO – Fear of Missing Out
This is the anxious emotion you get when it feels like you are being left behind. In relation to investments, you may start to question why your portfolio may not be up as much as your neighbor’s and feel compelled to make changes despite reason and fundamentals. This impulsive action could have you panic selling during market downturns or buying at inflated prices – both are detriments to a well-balanced strategy.
YOLO – You Only Live Once
The desire to enjoy today and the need to save for tomorrow is a balancing act. When uncertain about the future, people tend to focus on the short-term. Overspending on experiences, pleasure trips, and products that provide immediate satisfaction may result in your emergency fund or retirement savings falling short. There comes a point of no return when it’s too late to make up for it.
The Investment Gambler
The thrill of the win compels some to seek volatile investments or participate in short-term trading in the hopes of making a quick buck. However, the euphoria of a gain could easily be wiped away by the desolation of a loss. Your retirement account should not be the place for risky bets.
The Optimist
Emotional investors gravitate to chasing investments that have recently done well. They may be interested in the latest market leader or feel certain that a new trend or technology is the next hot investment. Unfortunately, the brilliant prospects may not turn out so good, and many find themselves in a bursting bubble or holding an outright flop.
Stay the Course
The financial markets will fluctuate over time. Understanding your values about money is key to putting the brakes on letting your emotions overtake your financial plan. Know your tolerance for risk and let your goals and time horizon remind you to stay the course.
Call PFM Today
Let PFM craft a well-tailored financial plan to alleviate your fears and take the guesswork out of investing. Call Professional Financial Management today to schedule a no obligation meeting to learn more about how we can be your trusted partner.