MINT HILL, NC – At Fulcrum, we believe that at the end of the day investors are loss averse. We have found that no matter what your risk tolerance is you always want to gain on the upside, but not to lose a penny on the downside. It’s a relationship between fear and greed.
Smart investing can overcome the power of emotion by focusing on relevant research, solid data, and proven strategies. You wouldn’t be human if you didn’t fear loss. The natural instinct is to flee the market when it starts to plummet, just as greed prompts people to jump back in when stocks are skyrocketing. Both can have negative impacts. Here are five principles that can help fight the urge to make emotional decisions in times of market turmoil.
- Market declines are part of investing
- Time in the market matters, not market timing
- Emotional investing can be hazardous
- Make a plan and stick to it
- Diversification matters
With all of this being said, would you consider yourself loss averse?
This article was released by Capital Group for use by your local Cambridge Investment Research Financial Advisor.
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Diversification and asset allocation strategies do not assure profit or protect against loss.
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