How to Prevent Emotional Investing
Watching your stock investment portfolio during times of turmoil (such as the extreme volatility after the presidential election), can be incredibly jarring. After all, you worked hard to attain your wealth, and those investments represent important life goals, like your retirement nest egg or children’s educational fund.
Ultimately, while we can’t escape the ups and downs that come with being a long-term investor, there are smart ways to manage through volatility and to help ensure you’re making the best decisions when it comes to your investments.
Fear can lead to impulsive behaviors, which can become downright dangerous in investing. That’s why wise investors know that a cool head and rationality are the tenants of successfully investing. So, rather than making emotion-driven decisions, they focus on the data. Let’s look at the aforementioned Donald Trump election victory as an example:
When Dow Futures slid nearly 800 points, many investors responded with fear-driven decisions and sold their investments in after-hours trading. Wise long-term investors, however, looked at the data and realized that the stock market has always recovered from panics, and were proven right when the stock market went to reach an all-time record high shortly after.
Consider an advisor
Don’t discount the value that an advisor can bring when it comes to long-term investing. Many of us aren’t able to understand all the dynamics at play involving risk and volatility, much less act on this knowledge when our own wealth is on the line. That’s why a trusted financial advisor can prove incredibly beneficial for preventing emotional investing. With your long-term goals, in mind, they can help you navigate these uncertain times and make informed decisions.
Consider (mindful) adjustments
The goal of investing is to bring you peace of mind with your finances, and volatile times serve as a good reminder revisit that goal. Rather than selling your investments, consider having a financial check-in, where you can strategically do a gut-check and look at your risk tolerance in light of your investing goals. In many instances, if you have a diversified portfolio that suits your time horizon and personal goals and circumstances, you’ll want to maintain your current allocation.
Financial check-ins with your advisor may help ensure you’re prepared for volatility, but if it’s been a while, now may be a good time to revisit your investment strategy to ensure you’re on the right track.
At LexION Capital, we meet individually with each client to craft them a portfolio based on their needs and goals. We help clients determine strategic asset allocations and investment strategies based on their long-term goals and risk tolerances. If you’d like to learn more, don’t hesitate to contact us today.