Behavioral Investing 101

I wanted to start today by quickly discussing why making emotional decisions in regards to finance can lead to costly mistakes. Most people have heard the old adage of “buy low, sell high” and yet people continuously do the opposite when confronted with real life situations. How often have people been scared of plunges, sold everything, then waited for things to go back up? That’s buying high and selling low. While managing emotions and financial behavior will be the focus of a longer blog post in the near future, the market volatility that’s been happening the past few days pushed this concept to the forefront.

Here’s a quick list of things to remember when you’re worried about markets swinging wildly:

• Historically, market swings are expected

• Over long periods, investments in the market significantly beat inflation

• Selling low and buying high doesn’t work

• Turn off the tv, most finance shows are there to generate a reaction from investors

• Don’t make important decisions based on emotions

If you are worried about the future, email me and I’ll be happy to discuss a strategy that makes sense for you.