Stop Thinking About It: How Fear Can Lead to Bad Investment Choices

If you’ve already made some wrong investment choices over the years, that’s okay. Mistakes are opportunities for us to learn and grow from. What’s not okay is making the same mistakes over and over. Jay Moreland, founder of Behavioral Finance Network, recently appeared on Getting There. He offers some simple words of wisdom: stop tinkering around with your investments.

Fear can hold you back

Jay shares that one of the biggest fears people have is losing their money. This starts with the amygdala – an almond-shaped mass in your brain otherwise known as the “fear center.” MRI scans have shown high activation of the amygdala when individuals think about the loss of finances. When fear takes over, people have a fight or flight response. The fear can be so overwhelming that it can lead to rash behavior – including the decision to switch up investments. Many investors made the mistake of “switching it up” too often, such as shifting from stocks to cash or bonds. However, tinkering around only gives you a false sense of control.

It’s best to leave them be

With fear in the driver’s seat, it’s no surprise that during stressful financial times, we see a rise in bad investment choices. Today, inflation stories plague the front pages of every newspaper. Potential financial losses are top of mind and people are spending many stressful hours thinking about how to “get to safety.” However, Jay reminds us that inflation is only a small part of a long-term investment strategy. Decisions based on today’s market may only have short-term results instead of lasting security. The truth is, leaving your investments alone for an extended period can reap the most reward.

Jay challenges investors to consider two scenarios:

  • Heirs receive funds from a relative who has long passed away and no one collected the savings.
  • An investment that was forgotten and rediscovered turns a profit.

Both these scenarios include investments that were left alone and thus stress-free. The individuals skipped the worry and stress of managing the investments and went straight to the best part: the results.

An advisor can help

Jay also emphasizes why It’s worth it to hire a financial advisor. Like the scenarios above, an advisor will take the load off you and do the work themselves. They’re the experts in investments and know what choices can lead to only short-term results. And if you are suddenly concerned with something, the advisor can offer clear guidance toward “safety.” People report feeling reassured and less burdened about potential financial losses when they work with someone they can trust and is knowledgeable in the field.

Gates Pass Advisors can help break the fear pattern around your finances and align your assets with your plan and your “Why”.  We understand your concerns and are here to provide the tools you need to ease your stress. This way you’ll invest with a healthier mindset and put the odds in your favor of financial success.