Your Money: Common investing emotions and how to overcome them – TwinCities.com-Pioneer Press

Think about the life you want to live as a retiree. Now think about how much money you’ll need to make that happen.

Peg Webb and Bruce Helmer

We guess you’re thinking of a pretty big number. And one way that many of us who dream of retirement one day save enough to actually stop working is by investing and earning returns on our savings.

But investing can be stressful, because like we said, this is the money that is supposed to last you all the years of your retirement. When you see the market suddenly rise or drop, it’s easy to get emotionally invested because stock markets aren’t something we can control. Today, we lay out some common emotions you may encounter as an investor and give you some advice on how to overcome them.

Fear

This is an emotion investors are surely aware of if they were invested in the stock market back in 2008. When stock values drop, fear can set in and prompt investors to sell, in hopes of avoiding further loss, even if they know that logically selling low is a bad idea.

Remember that the stock market is a long game. The money you have invested shouldn’t be money you’ll need next month to pay the mortgage. By pulling money you need in the next three or five years out of the stock market and into more stable investment options, you can feel confident that even in the case of a major correction, your money has the time to recover.

Greed

This emotion can be just as destructive, if not more so, than fear. When things are going well, like they were at the end of 2017, it can seem like a good time to buy into stocks that just keep rising. But what you are really doing is “buying high” and what goes up must come down. So, if you bought up bundles of stocks in November 2017, you were likely quite unhappy with the numbers you saw on your statements just three months later.

Remember to buy low and not to put all of your eggs in one basket. It’s easy to be attracted to the hot stocks, but it’s important to keep your portfolio diversified, even if stocks look like a sound option at the time. If you move all of your investments into a growing stock and it suddenly drops, well, you can do the math. Bottom line: diversify your portfolio, no matter how appealing one particular investment may seem in the moment.

Regret

This emotion is one that usually comes after either greed or fear. Whether you bought high and saw stocks drop or sold low and saw stocks rise, you will likely regret letting those other emotions take control.

We like to say that these feelings and reactions are normal, but that aren’t necessarily logical. We also know that when it’s your future on the line, it can be extremely difficult to keep a level head.

That’s why it’s important to have a third party to help you stay on the right track, no matter what the markets are doing. Having a financial adviser around to help remind you of your end goals, and to help you rebalance when it makes sense, can be a great way to pursue your retirement goals.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. Rebalancing a portfolio may cause investors to incur tax liabilities and/or transaction costs and does not assure a profit or protect against a loss. There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.

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