Stock markets have been pretty volatile this year, and it’s only April. If you are worried that turbulence is getting to be too much, I’ll ask you to take a moment, sit down, and let’s talk emotions and their impact on investing.
According to DALBAR (a well-respected research firm), most investors tend to buy high and sell low causing them to significantly underperform versus the larger markets over a 20 year timeframe. Why? Most investors tend to follow the crowd. I strive to do the opposite. I like to buy when the markets are in the red, things are on sale, and sell when the markets are in the green. Most investors will panic when the markets are in the red and sell, so please try to resist following the crowd in the action.
We always talk about being diversified because it is so important. Being diversified is investing in different asset classes, sizes of companies, equities, and income items. Mutual funds provide one of the easiest ways to diversify your portfolio. Diversification is not holding the same fund in different accounts. I had a client that had CD’s in a number of banks and thought they were diversified until I explained it was just the same asset in a number of locations. Please, check your diversification.
F.O.M.O. This new term is “fear of missing out.” I had a number of clients experience FOMO when bitcoin first started trading. In my opinion for my clients, bitcoin and other cyber currencies were more of a gamble vs. an investment. Influence from the news and friends can cause FOMO. I ask you to step back and think of your own plan before acting on this emotion.
There are often a number of emotions attached to money and investing. A quality financial plan can help keep those emotions in check.

disclosures:http://www.hechteffect.net/?page_id=31