How do emotions affect investing?
Money issues can create strong emotions. This is understandable. Our feelings of success, safety, and self worth are tied to money. Also, it impacts our lives tangibly with the freedoms it provides. The trouble comes when emotions drive investment behavior. Emotions often spark reactive, short-term decisions that end up being counterproductive to long-term financial security. The world’s instability, played out in the media daily, revs up people’s concerns about their financial future. The events that we’ve seen such as 9/11, the military campaigns that followed and national security issues – all can encourage people to make emotional decisions. Through good times, and in challenging times like these, a competent advisor can serve as a “buffer” between people’s emotions and their investment behavior.
