One Trick to Better Investing Lies Between Your Ears
There are lots of ways to be a better investor. One trick to better investing simply lies in controlling self-talk. A negative self-talk can allow our natural biases to come through. So, how do we become a slightly better investor?
Answer: Recognize a common bias that most, if not all, investors have – it’s called Loss Aversion. In plain terms it simply means that as investors, we feel more pain from a loss, than we do enjoyment from a gain. In other words, investors prefer to avoid losses more than experience gains. Losses hurt, emotionally and psychologically.
So how do we deal with investing bias?
First, recognize that this is normal investor behavior. Then connect yourself with a Financial Advisor that you trust. He/she can guide you in avoiding irrational and emotional decisions that do not align with your stated goals and objectives. A good Advisor will educate you on the investing topic at hand. They will play devil’s advocate for you. A trusted Advisor will also remind you of your stated investing goals and give you alternative ways to think about your choices.
Losses will show up. It’s just the normal business cycle playing out. This is a time when many investors will panic and sell. But we don’t control the downside of the markets. What we do control is our reaction to that falling market and/or investment loss. Thus, your connection with a reliable Financial Advisor will prepare you in advance for the tough times. You’ll take a long-term approach to investing and become more resilient to market downturns. By mentally and emotionally preparing for that inevitable down market, you’ll be managing your Loss Aversion bias and building your financial armor such that you will remain calm during the storm.
You’ve got this!
Be the Hero for You and Yours!
