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