The Wise Investor’s Counter-Intuitive Reaction
You probably heard a lot about the “Grexit” – Greece’s potential departure from the Eurozone – and when the news broke, some markets responded with increased volatility. However, a smart investor whose goal is long-term wealth creation tunes out the headlines for stability and growth.
Case in point: after the hype, you also probably overheard that Greece eventually struck an agreement with Europe, and will likely stay in the Eurozone. But when seeing headlines about “The Greek Crisis”, or any other pushed headline, it can be very tempting to respond through reactionary short-term investment decisions. However, fight-or-flight instincts don’t guide us to long-term investment success. Actually, often good investing can feel bad because it will often go against your gut reaction.
So with the news constantly flooded with predictions, how does a smart investor stay above the hype?
- Take a deep breath and look at the data
Despite short-term changes due to events, history has shown that the overall trend for the market is up.
- Revisit your long term goals
Visualizing the horizon and why you’re investing for the long term can help restore perspective. If you want to retire in 20 years, that’s a huge time horizon to weather the ups and downs compared to a short-term market flux.
- Do a gut check
If you aren’t comfortable stomaching these events, it’s acceptable to pass the ache on. One benefit of a financial advisor is that they help you stay on track for long-term success when emotional factors might otherwise tempt you to steer off course. They can enact an investment strategy on your behalf and help you avoid emotional decision making. If you choose to work with one, be sure that they are a fiduciary, who is legally required to act in your best interest.