The biggest obstacle of being a good long-term investor is letting our emotions drive our investment decisions. Here are some practical ways to avoid those feelings.
Sharon Ko: We’ve talked about emotional investing before and how a roller coaster of emotions can lead to poor decisions. Well, as the saying goes, experience is the best teacher. Here’s a lesson some learned the hard way.
Karl Eggerss: Markets have a funny way of making us look foolish. We hear a news event and we think certainly the market’s going to react a certain way, and oftentimes it does the complete opposite. During the pandemic, especially in the spring of 2020, the market’s had a dramatic drop and a lot of people panic, move to the sidelines. Of course, the market did rebound, a monumental rebound, and many of those folks never got back in and it made it very difficult to get back in because prices were much higher. Had they stayed put, had they simply stuck to their plan, they would have been much better off.
Sharon Ko: Financial advisor Karl Eggerss says when you craft that plan, make sure it fits you.
Karl Eggerss: Age, your expenses, your income, what you want your retirement to really look like, your risk appetite, and then you put an investment plan and a portfolio together that you can stick with. It’s something that will ebb and flow over time, but it takes a lot of things into consideration. That way you’re not having to make changes just based on your feelings.
Sharon Ko: So the big takeaway here, success over the long haul is knowing your weaknesses.
Karl Eggerss: The challenge is we have to know our faults and go, “You know what? I don’t know everything nor do I think the sky is falling or are we too optimistic?” We have to have a balanced agnostic approach when it comes to investing. That’s why sometimes hiring a financial advisor can do that because it takes the emotions and transfers it to them and they’re professionals that know what they’re doing.