Most people know that following the markets closely can be tiresome and nerve-racking.
The field of behavioral finance—one that I am passionate about—studies how reactive emotions can lead to self-destructive behavior. Fortunately, regardless of what the markets are doing, you can acquire several habits that will help you make calm, pragmatic financial decisions.
Watch this short video offering some behavioral finance best practices for investors, or keep reading.
1. Know your risk tolerance: Everyone's relationship with risk differs. Smart investing strikes a balance between risk, time horizon, and individual goals, allowing you to ride out brief market fluctuations more comfortably.
2. Seek out educated discussions: Up to 35% of people seek financial advice from friends and relatives. Family and friends aren't always the best sources of financial advice (even if they mean well). Instead, contact your financial advisor for a consultation. That's what we're here for: to assist our clients in making sound judgments.
3. Keep your portfolio diversified: Having a diverse portfolio is a tried-and-true strategy. Diversification is a method for reducing risk, but it does not remove the possibility of losing money if securities prices fall.
4. Know your plan and educate yourself: Start to think of market swings as a natural part of the process, and remember that your strategy should be built to withstand said swings.
Having a level of knowledge and control over your strategy can help relieve stress, and remember that no matter what occurs, you can always contact me to discuss any concerns you may have.