Three ways to avoid making emotionally charged financial decisions

Your finances

Your emotions can influence the choices you make. Learn how to better equip yourself to make emotionally well-grounded financial decisions.


Our emotions can influence the choices you make. Learn how to better equip yourself to make rational financial decisions.

Being on an emotional roller-coaster may impact your approach to decision-making.

When our emotions are heightened, decisions tend to be based on short-term objectives, without real consideration for their longer-term implications. This can apply to your financial choices too. While it may be difficult to watch the value of your portfolio decline, it may be even more difficult to recover from a series of poorly timed decisions.

Emotional investing

It’s important to remember that remaining calm during all market environments and staying focused on the long term is critical to reaching your financial goals.

Below are a few suggestions on how to better manage your emotions, and in turn, your strategic planning and decision-making:

1. Ask big-picture questions

During times of market volatility, it can be helpful to revisit your goals to see if anything has changed. Consider asking yourself questions such as:

  • Are my goals still the same now that my investments have declined?
  • Are my investing timeline and financial situation the same as when my portfolio was created?
  • Is my portfolio aligned with my risk tolerance?
  • Does my portfolio have an appropriate level of diversification?

If the answer is “yes” to these questions, then ask yourself why you need to make changes given the risks involved in getting it wrong. If the only thing that has changed is the current value of your portfolio, should this affect your long-term plan? These bigger-picture questions can help shift the focus away from short-term discomfort. If the answer to any of the questions is “no,” then discuss these changes with your advisor. They will review your plan and work with you to adjust as needed.

2. Avoid constantly checking your investment

Are you guilty of checking your portfolio on a daily basis? Reduce the emotional impact of market volatility by simply looking at it less often. There is greater likelihood you’ll see wider fluctuations in the value of your portfolio if you regularly check in on its performance. This is because the market tends to be more volatile over shorter time periods. Checking your portfolio less frequently may mean you’re more likely to see trends over the long term.

3. Speak with an advisor

Many advisors have been through multiple market cycles and have navigated difficult periods before. An experienced advisor can share their expertise and experience and provide you with advice during difficult times. This can prove extremely helpful in keeping your plan on track.

Wealth planning starts with a conversation

Contact us to talk to a relationship manager and put your wealth plan on a path for success.

Thinking about switching to cash?

Here are some questions to consider if you are thinking about holding cash instead of stocks:

  • What is my plan for getting back into the markets?
  • What are the tax implications of my decision?
  • Where should I direct my savings in the meantime?
  • How long can I afford to be out of the market while ensuring my goals are still achievable?
  • How will I know when (and if) it’s safe to get back into the stock market?
  • If I re-enter the market, how can I be more comfortable with volatility in the future?

Dos and don’ts for controlling emotions

  • Do seek advice.
  • Do understand your goals, objectives, risk tolerance and investing timeline.
  • Do find the right information about your investments (e.g. analyst reports, financial statements, etc.).
  • Do stay focused on your plan.
  • Don’t panic and act before understanding the implications of your decisions.
  • Don’t check your investments too frequently.

Keep your emotions in check

Don’t let uncertainty and periods of volatility derail your financial plans and goals.

Reacting emotionally often complicates the process. The more you try to time your decisions according to the markets, the worse off you may be.

Even though wealth planning is driven by facts and figures, it’s also important to consider your feelings and beliefs about money. Nearly everything we do requires it in some shape or form – and yet money is intensely personal. People dedicate so much of their lives to earning it, and humans are emotional beings by nature.

As you grow your wealth, it’s important to work with an advisor who can share their experience and insight to help you make well-grounded financial decisions for you and your family.

Find out more about how to plan for, protect and grow your financial future.

This document contains general information only. It is not intended to provide specific tax advice, investment advice or an investment recommendation. Please bear in mind that the investments or services contained within this document may not be suitable for all investors. Past performance is not a guide to future performance, future returns are not guaranteed, and a loss of original capital may occur.

This publication has been issued by Royal Bank of Canada on behalf of certain RBC ® companies that form part of the international network of RBC Wealth Management. You should carefully read any risk warnings or regulatory disclosures in this publication or in any other literature accompanying this publication or transmitted to you by Royal Bank of Canada, its affiliates or subsidiaries.

The information contained in this report has been compiled by Royal Bank of Canada and/or its affiliates from sources believed to be reliable, but no representation or warranty, express or implied is made to its accuracy, completeness or correctness. All opinions and estimates contained in this report are judgments as of the date of this report, are subject to change without notice and are provided in good faith but without legal responsibility. This report is not an offer to sell or a solicitation of an offer to buy any securities. Past performance is not a guide to future performance, future returns are not guaranteed, and a loss of original capital may occur. Every province in Canada, state in the U.S. and most countries throughout the world have their own laws regulating the types of securities and other investment products which may be offered to their residents, as well as the process for doing so. As a result, any securities discussed in this report may not be eligible for sale in some jurisdictions. This report is not, and under no circumstances should be construed as, a solicitation to act as a securities broker or dealer in any jurisdiction by any person or company that is not legally permitted to carry on the business of a securities broker or dealer in that jurisdiction. Nothing in this report constitutes legal, accounting or tax advice or individually tailored investment advice.

This material is prepared for general circulation to clients, including clients who are affiliates of Royal Bank of Canada, and does not have regard to the particular circumstances or needs of any specific person who may read it. The investments or services contained in this report may not be suitable for you and it is recommended that you consult an independent investment advisor if you are in doubt about the suitability of such investments or services. To the full extent permitted by law neither Royal Bank of Canada nor any of its affiliates, nor any other person, accepts any liability whatsoever for any direct or consequential loss arising from any use of this report or the information contained herein. No matter contained in this document may be reproduced or copied by any means without the prior consent of Royal Bank of Canada.

Clients of United Kingdom companies may be entitled to compensation from the UK Financial Services Compensation Scheme if any of these entities cannot meet its obligations. This depends on the type of business and the circumstances of the claim. Most types of investment business are covered for up to a total of £85,000. The Channel Island subsidiaries are not covered by the UK Financial Services Compensation Scheme; the offices of Royal Bank of Canada (Channel Islands) Limited in Guernsey and Jersey are covered by the respective compensation schemes in these jurisdictions for deposit taking business only.

Let’s connect

We want to talk about your financial future.

Related articles

When do I need a wealth manager?

Your finances 6 minute read
- When do I need a wealth manager?

Seven tips for organising your finances in the New Year

Your finances 5 minute read
- Seven tips for organising your finances in the New Year

2023 UK Autumn Statement: What does it mean for your wealth?

Your finances 7 minute read
- 2023 UK Autumn Statement: What does it mean for your wealth?