Amid an ongoing market downturn, many individuals may be prone to emotional investing. Michael Liersch, Wells Fargo head of advice and planning, joins Wealth! to discuss strategies for avoiding emotionally-charged decisions during this period.
Liersch notes that market downturns can lead to “doom-scrolling,” or individuals constantly checking their accounts. This behavior typically results in three main reactions: risk aversion, where people feel the need to eliminate uncertainty; action bias, which creates an urge to de-risk; and “herd-following,” where one person’s actions quickly lead to a “global phenomenon” of others following suit.
To refrain from emotional investments, Liersch advises three key strategies. First, ensure you have a collaborator to “help keep you in check.” Second, constantly review and reassess your financial goals. Lastly, create a comprehensive plan, emphasizing that “you don’t want to be making decisions in the absence of a plan.”
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