TAKE CONTROL OF YOUR EMOTIONS WHEN INVESTING
As an investor, you may find that your emotions, rather than your financial strategy, sometimes guide your behavior. This can cause you to miss out on growth in your savings. But you can take control of your emotions and make sure you're basing decisions on your big-picture interests.
For example, you may feel the urge to dump stocks after the markets tumble. But did you know that may be the worst time to sell, because it causes investors to lock in their losses and risk missing out on the market's recovery? Similarly, you may be tempted to load up on stocks when they're performing well and may not allocate enough to bonds and other fixed-income investments that show steadier performance over time. That's why it's important to understand and overcome these emotional behaviors so you're not hurting your long-term investment performance.
A Three-Step Plan to Taming Your Emotions
You can keep emotions at bay when investing. First, analyze your investing style to determine if you're someone who tends to have knee-jerk reactions. Take our Chief Retirement Officer Quiz to determine your retirement savings personality.
Next, develop a plan. Design an asset allocation strategy tailored to your personal financial goals and risk tolerance. For instance, if you know that you want to hold 70% of your retirement portfolio in stocks and 30% in bonds over the long term, you're less likely to let your emotions or current events throw you off course. Your workplace retirement plan website or your plan representative can help you create an asset allocation strategy suited to your unique needs.
Finally, before making any decisions, consider waiting 24 hours so you can remind yourself of your long-term goals instead of focusing on short-term movements in the markets. A secure retirement is the result of years of steady saving and asset growth. When you take control of your emotions, you can truly keep your retirement goals on track.