With such turmoil going on in the world, markets have reacted predictably. Uncertainty creates volatility.
During the early part of March 2022, global stock markets went flying up and down. We are confident they will recover but we don’t know how long it will take.
Knowing this, how should you respond? Unfortunately, the majority of us make the same mistake with our money, over and over again, and it’s all because of human nature. We buy high out of the desire to jump on the bandwagon of a ‘good thing’ (you might even say we do this out of greed), and we sell low out of fear, as we see the value of our money slipping away.
Imagine you’re going to buy a new car. You walk into the dealership and your preferred model has just been marked up 30%. It must be popular, so you go ahead and buy it. In fact, you’re so delighted with the new, higher price, you buy another one for your partner!
This is just what we do when it comes to investing in the stock market. We are hardwired to get more of what gives us security and pleasure, and to run away as fast as we can from things that cause pain. Mix into this our desire to be part of the herd, as we feel there is safety in numbers. So, when everyone else is buying, we want to buy too, for fear of missing out.
At Proposito, we want to help people to change this mindset. It’s part of our LifePath financial planning service. If you’d like to chat to us about making smart money decisions, we’d love to talk to you. Email hello@proposito.co.uk or call our Cirencester office on 01285 708444.
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