One of the hardest things to do as an investor is to continue to stay the course of your financial plan during periods of increased stock market volatility. Why? Well, our human nature of fear comes out and starts to play tricks on us. These may include not being able to look past a day, week, or even a month when times are bad. You might be caught up looking at your account balance hourly and losing track of what you are trying to accomplish. Fear causes us to make just as many bad decisions when it comes to our finances as greed. However, greed on the flip side may cause us to hold onto a good thing for to long. You have a winner in our portfolio and choose not to sell it because you think it is going to keep going higher. Then, after it reverses course it is impossible for us to commit to selling it. Why? Simple, we want more. Then even worse we sometimes let a winner turn into a loser and then only commit to selling when it gets back to break even.
I can remember back in 2008 when everyone at least here in Florida was ready to jump out of there one story windows... (joke) Flip back before that to 1999 and Financial Advisors were getting fired for not returning 100% with the latest technology sensation.
The fact of the matter is that individual investors have to become more like machines with there long term investment approach and less like humans with varying emotions. This is obviously easier said than done, but nonetheless it should be something that we strive to achieve.
Stay safe out there and remember to investment less with emotions and more like a machine...
Eric Marvin, CFP®
Past performance is no guarantee of future results. Please always consult your financial advisor with questions pertaining to your specific situation.
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