Today for the first time, I’m taking Halloween seriously.
My kids and I have sprayed the front garden with shaving cream, made pumpkin snacks and are all set for some trick or treating.
Yet the one thing we’re not doing is dressing up as ghosts, vampires or witches…why? because that’s just too scary I’m told. Never mind that it’s what Halloween is all about.
But it gets me thinking, it can be really fun to be frightened when it’s a situation we choose, but when it comes to money most of our fears do us more harm than good.
Six Park CEO and co-founder Pat Garrett, loved the calculated risks of Halloween as a kid and says you can learn a lot from it when it comes to investing.
“Don’t let fear trick you into bad decisions,” he says. “Markets recover over time, and investors who hold their nerve during tough times are usually rewarded in the long-term.”
So, what investment fears make most of us jump, and how can we stare them down?
“Fear of missing out can lead investors to make impulsive decisions – if everyone else is buying, should you buy too? Maybe not,” he adds.
Sometimes markets rise because of a ‘herd mentality’, when investors buy for irrational reasons – FOMO.
“Buying in this environment and following the herd can sometimes limit your opportunity for returns because the value has already jumped.
Don’t feel compelled to follow others when it comes to your money – if you have a plan (and you should) then stick to it.”
Fear of loss
“When markets get the jitters, sometimes all it takes is for someone to say ‘Boo!’ and investors start to panic. And panic-selling is just as bad as buying at the top – if an investment is losing value, the only way to realise the unfortunate loss is to actually sell.
“Many times, it’s best to hold onto it until the inevitable recovery.
“Market cycles – both ups and downs – can cover years, and making hasty decisions based on a day’s or month’s headline news is a common investor mistake.
“Following the crowd doesn’t always pay off – instead, focus on your long-term goals. You don’t need to look at your portfolio every day either – getting overly excited or worried by short-term gains and losses is another common trap.”
Fear of risk
“’No risk, no reward’ is an investment cliché for a reason. Risk and return are closely linked, so you need to understand how you feel about risk and how you’re likely to respond to the natural cycles of investing.
“That’s not to say every investor should be aggressive with their investing – far from it. Investors are all different and some are more comfortable with risk than others. But knowing what you can afford to set aside – and for how long – is critical to investment success.
“Diversification, or putting your investment eggs into different baskets, is also a smart way to spread risk (higher or lower) to suit your own situation.”
Fear of the unknown
“Stepping into the unknown can be frightening and if you’ve never had an investment portfolio it can seem daunting. But it’s not as scary as you might think.
“Technology has levelled the playing field when it comes to investing, making it possible for investors with any level of experience to create a low-cost, professionally managed portfolio of diversified assets.”