Success in investing isn’t just about numbers and strategy. It also involves navigating the emotional terrain that comes with financial decision-making. To be a successful investor, how important is it to stay steady and level-headed?
Rash investment decision-making can be detrimental. Whether it’s the fear of a market downturn or the excitement of a potential windfall, emotions can lead investors to make choices that jeopardize their financial well-being. The emotional cycle of investing can result in chasing returns, panic selling, and letting a variety of emotional biases control one’s investment strategy – a recipe for financial disaster.
Maintaining a steady, emotionally resilient attitude despite what is happening in the markets is a lot to ask. But it allows investors to maintain a strategy and ensure that they make well-informed, objective decisions. Investors that can remain objective will approach their investments with a balanced, long-term perspective, making subtle changes as they go through market and economic cycles in order to add value.
But what if you can’t distance yourself emotionally from your investments? Consider enlisting professional assistance.
Many investors rely on wealth advisors to help them stay on track. When an investor enlists an advisor to help them develop a comprehensive plan that aligns with both their current situation and long-term financial goals, research shows the investor is more likely to be successful.
The Dalbar studies have consistently shown that individual investors often underperform the market due to behavioral biases, such as emotional decision-making and sub-optimal market timing.
Vanguard, a prominent investment management company, has conducted research on the value of financial advice. The “Advisor’s Alpha” concept emphasizes the various ways that wealth advisors can add value, including from a behavioral coaching standpoint.
It’s important to note the value of a wealth advisor goes beyond just investment management. Financial planning, tax optimization, retirement planning, and other areas contribute to a well-rounded, comprehensive approach to wealth management.
In the world of investing, not getting lost in the moment is critical in achieving financial success. Those who have mastered investment steadfastness developed it as a skill over the course of their experiences. Other investors may prefer to focus on other pursuits, and enlist wealth advisors to manage their investments. By understanding emotional resilience, investors can secure their financial future and reduce the emotional toll that comes with financial uncertainty.