When we invest, we know that we are taking a medium to long term view, yet our short- term immediate reaction to events can hijack our investment plans. In times of uncertainty, they can especially have a negative impact if they are not managed well...
Why does this happen?
The environment in which we make decisions effects our emotions and can influence the choices we make. Our emotions often drive our choices. We recognise perceived threats and react instinctively to avoid them, but it doesn’t always help us to make sound financial decisions in the modern day.
Behavioural Journey Graph (below)
When the news is optimistic, especially around financial topics such as mortgages and investments, we tend to be risk takers. However, when markets are falling, and all seems doom and gloom we tend to be risk avoiders.
This can result in investors buying only when prices are high and selling only when they are low - which is something our unemotional and considered selves will recognise as unwise, and a behaviour that our future selves may regret.
This emotional response, where we sacrifice long term goals for immediate emotional comfort can be highly detrimental to the performance of our investments, and highlights the need to have a long-term investment plan to adhere to, regardless of our emotional ups and downs.
How working with a financial adviser can help
We will work with you to create an investment plan and portfolio that is specific to your individual needs and financial goals. By helping you establish a long-term financial strategy that reflects your needs, we will support you on your investment journey and help you avoid any potentially detrimental emotionally driven decisions.
