When it comes to your wealth, emotions can be very harmful. Although it’s fine to make an occasional purchase based on emotions, feelings often innocuously steer us towards danger when it comes to the stock market. But just like you can become more confident or less stressed, you can also harness your emotions towards success when it comes to stocks.
With that in mind, here are some ways emotions can harm your investments:
Admiring the financial success of others is one thing, but trying to mirror their actions is an entirely different matter. This plays out in a big way when the stock market is suddenly skyrocketing. You may be tempted to chase that success by following suite and throwing off your asset allocation. This often leads to more harm than good, however. Essentially, it’s already too late and you’re missing out on the upward momentum, while also throwing off your long-term game plan in the process.
On the other end of the spectrum, being overly fearful can also cause a great deal of harm. For instance, when there’s a dip in the stock market, this emotion can lead you to sell your investments at a low point (while ignoring one of the basic tenants of investing). Since you’re not only losing money, but also missing out on the stock market’s eventual recovery, this one of the biggest ways emotions can harm your investments.
How to avoid the ways emotions can harm your investments
At LexION Capital, we help our clients stick to their goals through a rational investment plan, even when their emotions are trying to veer them away from success. If you’d like to learn more, schedule a conversation with one of our fiduciary advisors today.