Is Fear Putting Your Financial Plan at Risk?
Duncan Manor, Photographed by George Lane.
A Haunting Parallel: Fear in Finance and Ghostly Mansions
Some say the old mansion is haunted, and I live just down the road from it! It’s the Duncan Manor, a historic building in the countryside of Towanda, IL.
It doesn’t generally spook me, since as a financial advisor, I tend to be skeptical and a bit pragmatic. However, I will admit a shiver went down my spine when a haunting image of the building appeared while scrolling through Facebook. Zooming in on the bottom left window, it appears as if there's a phantom spirit looking out.
Creepy, and although I don’t see myself visiting there any time soon, I doubt I’ll go out of my way to avoid driving by it.The Two Faces of Financial Fear
Letting my fears change my normal routines would be irrational, right? Yet with recent market volatility, there are people who are changing their financial game plan out of fear! Such an emotional response can cause irrational actions that can be costly. Fear manifests in the financial world in two primary ways. Firstly, headlines, bulletins, or long-term market trends often spook investors, leading them to question their entire investment strategy. In such instances, reactive decision-making might compel them to sell low and buy high, potentially jeopardizing not just their investment portfolios but also their broader retirement planning. Secondly, there's the fear of being “too invested” in the market. Ironically, this fear is most common among those who are excellent at saving money. They accumulate large balances in their bank accounts but hesitate when it comes to investing, particularly in equities. This aversion to market exposure may feel like a conservative strategy, but in the long run, it could mean missing out on potential gains, thereby putting their financial future at risk.The Hidden Costs of Emotional Investing
These fears aren't just theoretical; they translate to tangible financial setbacks. While it's true that market indices have shown promising returns over the long term, actual investor returns often lag due to poor timing and reactive behavior. The cost of these impulsive decisions can be substantial, not just in terms of missed opportunities but also in the erosion of one's life savings over time.Freedom from Fear
While behavioral finance has revealed the ways in which our emotional responses can interfere with sound financial decision-making, the expertise of a professional financial advisor can provide the analytical approach that investing requires. We use cutting-edge fintech tools that analyze behaviors and risk tolerance to develop custom portfolios for our clients. These portfolios are rigorously tested, with projections run through a multitude of Monte Carlo scenarios to predict the odds of successfully achieving your financial goals. But our work doesn't stop there. As your financial advisors, we also engage with you to discuss any fears or concerns you might have. Investing isn't just about numbers; it's a deeply personal endeavor tied to your life goals and future well-being. When emotions threaten to impact your financial decisions adversely, we are here to provide seasoned advice to help you manage those feelings. Our expertise goes beyond simply managing your investments to include emotional support and behavioral coaching, which are just as crucial for long-term financial success. The key takeaway is that fear shouldn't dictate your financial decisions. Through professional financial planning and advisory services, you can confront market uncertainties and life's various challenges with a balanced and confident outlook. The goal isn't merely to protect your financial assets but a path toward more security for both your wealth and emotional well-being!
Krista McBeath is an Investment Advisor, Chartered Financial Consultant, a Licensed Insurance Advisor, a Fiduciary, and an experienced tax advisor who specializes in financial planning, investments, and insurance. She utilizes advanced tools for in-depth calculations that analyze tax and retirement scenarios to help her clients avoid a future tax time-bomb. Whether this means enjoying more of your hard-earned money in retirement or passing along assets to loved ones with less tax burden, planning makes the difference.
Her Amazon best-selling book, The Generational Wealth System outlines a holistic approach to preserving lifestyle, wealth and legacy.
