Plight or Flight: How fear can impact your investments

21349537_sRecently I was presented with the opportunity to take a trip; one that would require me to board an airplane. I had flown before, but it was when I was a small child so my recollection of the event was rather vague.

In the weeks leading up to the flight my fear and anxiety grew. There were a few brief moments when I considered not even taking the trip simply because my fear of flying began to get the best of me.

It wasn’t because I was afraid of heights or afraid of the plane going down; it was the fear of the unknown and the fact that once we were in the air, I had no control.

Is Fear Getting the Best of You?

Fear is said to be one of the strongest emotions humans can experience. When it comes to fear we instinctively take action to try and eliminate it, even if by doing so we behave irrationally and illogical.

Humans often react to eliminate their fear before they consider the consequences of that action; with investing, reacting to eliminate fear often means selling at the worst possible time. We miss out on opportunities to better our position simply because we focus the majority of our attention on what we are afraid of, rather than focusing on what taking a risk could do for us in the long term.

Two Ways Fear Will Cost You

Here are a couple of the big thoughts and fears that can haunt investors:

I don’t have enough money to invest – While waiting to invest may not cause immediate panic, it can increase the chances of not reaching your goals, including retirement. With traveling, the longer you wait to begin, the fewer places you will be able to visit during your lifetime. The same concept applies to investing. The longer you wait to begin investing and accumulating wealth, the less you will end up with as the powers of compounding are missed out on.

I can’t afford to lose everything – Seeing a 10% dip in the market value of your investments can be very hard to stomach and can cause one to panic. Learning how to not worry about a falling stock market is one of the most valuable character traits an investor can have. So long as you have set up your portfolio in a way that aligns with your risk capacity and have properly diversified your investments, riding out market turbulence should be of no worry to your long term financial picture. The important thing to remember is to not eject and behave irrationally when things start looking bleak. Rather, those occasions may just be the ones that lead you to the greatest returns.

Having an experienced pilot gave me the peace of mind that I would reach my end destination safely and assisted me in overcoming my fear of flying. Working with an experienced financial planner can serve as your guide to help you overcome your financial fears and get you on the path to financial success. Contact us to get started on your financial plan today.

 

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