It can be difficult to not get emotionally caught up in the ups and downs of the investment markets when it’s your money that’s on the line. If your investments are up, you might become overconfident. And if they drop, you might panic. The investment decisions you make when you’re overconfident or panicking may very well not be the best decisions for your situation.
Think Before Acting
If an investment suffers a loss, your first reaction may be to immediately get rid of it. However, that may not be the best course of action.
Take the time to look at the investment’s long-term performance relative to its benchmark. Consider how the investment fits in with your portfolio’s objectives and time frame. Unless there are convincing reasons to sell, you may be better off sticking with your original investment strategy for the time being.
Focus on the Facts
It may be human nature to follow the crowd. If everyone else is excited about a particular investment, you probably don’t want to miss out on this next big thing. Yet following the crowd when investing may not be the best choice. By the time you hear about the latest, greatest investment fad, it could be too late to benefit from any investment growth. Plus, if it sounds too good to be true, it probably is. Your best bet may be to focus on the facts and follow your investment strategy, not the crowd.
Keep Your Perspective
Don’t base your investment decisions only on current market conditions. Instead, look at the market’s historical performance to give you perspective. Even a quick glance will tell you that both bull and bear markets have occurred over the years, so whatever is happening today may be different tomorrow.
Get Your Head Out of the Sand
Sometimes, an investment does take a long-term turn for the worse. Or, it no longer fits your investment strategy. You may find you’re reluctant to act when it’s time to sell an investment. Perhaps you feel emotional about the investment because a family member recommended it or because you’re familiar with the company name.
But holding onto an investment for emotional reasons could hurt your portfolio’s performance. You shouldn’t avoid making the hard decisions when you’re investing for your future.
If you’re having trouble being objective, we can help. Your financial professional can help you make investment decisions based on facts, goals, and time frame, not on emotions.