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Media chaos causes investors to fear investing.

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Psychological fear can hold one back from investing. People behave according to their mind-set. Some of the following thinking can keep one from not putting their money to work by buying equity investments such as equity investment funds. If you have said any of the following statements you may be experiencing investor anxiety:

“I think the markets will pull back and lose some value.” I will wait and invest when this happens.” This viewpoint is based on the need for having a belief confirmed before acting, where the investor must minimize any evidence that contradicts their belief-mantra. The media frequently offers bad news if the market has a low day, and it is easy to hear only this kind of information while filtering out other positive news. This process can paralyze an action plan to invest for years.

“I want to immediately sell the investment, if I see a profit.” People might sell an investment early once it rises in value, for fear of any future loss. Aside from considering taxation, an investment with either a gain or a loss, once sold, ends any future potential of that investment rising in future value. To avoid this mind-set one should have a disciplined written plan for buying and or selling investments that can be frequently referred to.

“The market is bound to correct and head downward because it is at a peak.” Anchoring our point of view occurs when someone assigns a reference number, like a 52-week high or low, to compare a price of an investment stock or unit value of a fund or a stock exchange’s last peak value. Past price movements are poor predictors of future price performance. When you invest for the long-term for retirement, using past price patterns is comparable to driving your car while gazing in the rear view mirror as a reference.

Conclusion
The above emotional mind-sets can ruin or avoid forming an otherwise great investment plan. Work with your investment advisor to help you gain an understanding of how the mind can trick us into failure simply by not investing over the long term. He or she can help you develop a risk tolerance profile along with an investment plan.

“Individuals who cannot master their emotions are ill-suited to profit from the investment process.” Benjamin Graham

 


 

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