It’s natural to let your emotions dictate some day-to-day decisions, but have you considered how emotions may hinder your long-term investment goals?
Have you ever made investment decisions based on your personal values, past memories, or what you hear on the news? Are you impacted by trends or how EVERYONE else is investing? If the answer is “yes” to any of these questions, you may be letting your emotions make important investment decision.
Are you getting in your own way?
Being an emotional investor is like riding a rollercoaster that rises and falls with each market movement. You typically panic and tend to sell on the way down, and then buy back in at a higher price on the way up, only to demand a fire-sale when it turns south again.
A recent DALBAR study shows how this type of reactive investing can impact long-term growth. Over a 20 year period period, the average emotional equities investor lost $162,062 compared to the S&P 500 Index, and the average emotional fixed-income investor lost $150,767 compared to the Barclays U.S. Aggregate Index.1
As an emotional investor, your tendencies to buy high and sell low are negatively impacting your investment growth potential. Rather than staying the course with long-term goals in mind, you have a greater desire to avoid the risk of uncertain loss.
Combat emotional investing by implementing strategies that help you make more rational investment decisions.