emotional financial decision making

Are High Emotions Bringing You Low Returns?



Posted on: 13th October 2023

A high number of investors fall into a category where emotional financial decision making hurts the performance of their portfolio. Not only is their portfolio struggle with this mindset – the long-term goals are also affected.

Logic and facts are the lifeblood of good investment decision-making. Emotions stretching between fear and excitement easily throw an additional layer that could cost you more than you know.

Costing Investors

According to a published report in FTAdvisor, emotional financial decision making costs investors around 2% each year in foregone returns, with a percentage influenced by the media (47%) and others taking too little risk (44%).

If this is you – you are certainly not alone in the investing circle. There is good news, however, as there are ways to reduce your emotional hold on your investments and the effect emotions have.

Focus Forward

If you want to be successful in investing, you need to accept that market volatility comes with the role. You are bound to read seasonal headlines focusing on the rise and drop of the markets. Most of the time, it makes for sensationalism.

Investment scare headlines ignore the bigger picture. Traditionally, markets smooth out over the long term and do deliver returns. What you should consider is that headline news on the investment market is not tailored to you specifically. That is what independent financial advisers Manchester are there for.

Turning off the national noise can be difficult, but it will help to reduce the chances of your emotions affecting your decisions. Instead, get tailored and educated advice from your adviser purely focused on your portfolio and prevent those knee-jerk decisions that affect your wealth.

Balance Your Risk

Every conversation with a fresh investor will have concern over taking on too much risk. No one likes the thought of losing their money and having a detrimental effect on their life goals. Whilst natural for concern over risk, nervous investors can be too risk averse.

Whilst you may feel more comfortable with less risk to keep your money safer, you are missing out on the potential growth and running the risk of falling short of your goals, even with the opportunity to achieve them.

That is where setting up your risk profile with independent financial advisers Cheshire is essential for understanding which investments are best for you. By considering the range of areas from assets held to investment goals, you can have a tailored risk profile that suits you and gives confidence to step out of your comfort zone to reach your goals.

Whether you would like to talk about investing or wish to review your existing portfolio, contact the team at Haven IFA today so that you have confidence in your investing future.