You're Wired to Fail–Really!
We are hardwired to be poor investors. Accepting this is the key to your success as an investor.
50% off your dream car!
Great news! That dream car you've been fantasizing about for months just went on sale for 50% OFF AT YOUR LOCAL DEALER! No joke, really! Kidding aside, if this were a reality, I'm guessing anyone contemplating a new vehicle would jump at this chance and move forward with the purchase.
After all, the market tells us the normal value of the car, so getting it for 50% off is unheard of.
You buy the car when this happens.
And yet we hesitate on the market
Now, change "car" to "S&P 500," and I'm guessing the excitement you felt about the 50% drop in price (for the car) turned to a feeling of terror and discomfort when you think about your investment portfolio dropping in price.
I've yet to meet someone who is naturally excited when the market drops. Even with decades of experience, multiple downturns, extensive studies, and complete confidence in the power of markets and human ingenuity, I still feel that queasy pit in my stomach during a 30% market drop.
We are simply not wired to deal with the market. It evokes fear, and we must invoke discipline to protect our financial security:
"We must all live with one of two pains: the pain of discipline or the pain of regret." - Jim Rohn
So what is the answer?
Great question! Here are three steps to take, in my opinion:
- Acknowledge the fear. The fear you're facing is both normal and real. Trying to hide from reality never works.
- Feelings are real, but they don't always reflect reality. This is a HUGE concept! Acting on emotions instead of intellect can be a costly mistake.
- Stick with your plan. This is the plan you made when you were in full control of your emotions, thinking rationally.
Does this guarantee you'll feel comfortable? No. Does it guarantee that things will work out as they have in the past? Also no. But, in my experience, this is the best recipe available. Until someone shows me a better one, I'm staying the course.
Hopefully, today's message has given you at least one idea to think about. If even one person somewhere in the world benefits from this, my efforts have been worthwhile!
Would You Like More Support?
- Do you have a well-defined Investment Policy Strategy that is used to drive your investments in support of a comprehensive financial plan?
- If not, would you like to partner with someone who is used to helping people get through these struggles and (then, with confidence) implement portfolio strategies in a systematic manner while focusing on your desired outcomes?
If so, feel free to send us an email or give us a call. We'd love to have the opportunity to help you find a bit more peace of mind when it comes to investing.
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F5 Financial
F5 Financial is a fee-only wealth management firm with a holistic approach to financial planning, personal goals, and behavioral change. Through our F5 Process, we provide insight and tailored strategies that inspire and equip our clients to enjoy a life of significance and financial freedom.
F5 Financial provides fee-only financial planning services to Naperville, Plainfield, Bolingbrook, Aurora, Oswego, Geneva, St. Charles, Wheaton, Glen Ellyn, Lisle, Chicago and the surrounding communities; to McDonough, Henry County, Fayette County, Atlanta and the surrounding communities; to Venice, Sarasota, Fort Myers, Port Charlotte, Cape Coral, Osprey, North Port, and the surrounding communities; and nationally.
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