Managing the 2 Emotions in Investing

Fear and greed rule the markets

Managing the 2 EMOTIONS of investing:

 

FEAR: There's no fear like the fear of the unknown. When we're fearful we may have a tendency to stick our heads in the sand and simply hope for the best. We also tend to avoid what we do not understand. There's no shortage of information available on investing. Start with and stick with what you understand and grow from there. If you don't understand something it's probably best to stay away from it until you do. You can manage your fear by educating ourselves and by acquiring the services of a trusted professional advisor (aka: Us!). As knowledge increases - fear decreases.

 

GREED: This is the most difficult. This is why lottery ticket sales are so lucrative. We have visions of being ultra-rich. We want the big winner investment that will solve all of our money woes at once. Einstein said the 8th wonder of the world is compound interest. An ancient proverb says, "He who gathers little by little makes it grow". We can manage this emotion by having a PLAN. Start with the end in mind. What is it I want to accomplish? How much time do I have? What do I need to do consistently to achieve this goal? The biggest mistake we can make if we are DIY investors is to sell the winners too soon and hang on to the losers too long because we make our decisions based on emotion rather than sound fundamentals. An investor earning 6% consistently for 30-40 years will always be furthur ahead than one who has frequent ups and downs and starts and stops and long periods of time out of the market.

 

At Langford Financial Inc. we focus on solid planning which includes risk management, and customized action plans and wealth preservation and growth. If this is something you need contact us to get started! 

 

Want to retire in the next few years? Find out why a Retirement Income Plan is necessary.

 

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