on March 11, 2025
A major part of being a responsible and prudent investor involves ignoring your emotions and kneejerk reactions, and turning to logic and evidence to guide you. With our interconnectedness, all-consuming social media, and new products and services releasing with rapid-fire speed, it can be easy to get caught up in both positive and negative messaging. And that, unfortunately, can lead to making poor decisions that could ultimately have detrimental effects on your financial future and security.
Emotions in Today’s World
We live in a world that constantly stirs up our emotions. Whether you’re listening to the news, scrolling through social media, or listening to an advertisement, you are subjected to the often-emotional viewpoints and opinions of others. Though tapping into people’s emotions is a technique that’s been around for ages (likely since the first salesperson), it seems worse and more pervasive than ever. We can scarcely pick up our phones without someone screaming about how the world is going to end, or stocks are going to plummet, or we have to buy a certain product or carry out a certain action to prevent personal ruin.
On the flipside, emotions can also play with our hopes and aspirations. Millions of products exist that claim to improve our health, make us look younger, skyrocket our personal wealth, connect us with likeminded people, improve our nightly sleep, etc., etc. In some ways, these “solutions” can be more harmful than their doom-and-gloom counterparts. They prey on our desire to do better and be better. They offer easy solutions to complex problems (for only $35.99 per month!).
In the US, we’re living through an especially emotional time, filled with political tension, uncertainty, the dismantling or modification of established systems and organizations. In this climate, if someone were to offer you a “guarantee” to improve your life and safeguard your future, you might be inclined to take it. However, any novel, trendy, or overly simplified scheme or product should be treated with an abundance of caution. And this is certainly true when it comes to investing.
Emotions and Investing
In short, long-term investing and financial planning should never be based solely on emotions. Though overly pessimistic reporters or social media influencers might say, “Sell now!” or “Swap your stocks for gold!” or provide some other piece of panicky advice, it is best to tune out the noise. Keep in mind, these people rely on sensationalism to boost their ratings and generate more traffic for their channel, website, or page. They generally won’t garner as much attention by telling people, “Stay the course and check in with your financial advisor if you would like to rebalance your portfolio.”
In truth, evidence-based financial planning and investing is pretty boring. Trustworthy financial advisors will likely offer the same general guidance: plan long-term, diversify, leave your investments alone, and occasionally rebalance your portfolio (preferably with their guidance). We offer this advice because it is reliable, logical, and has a long track record of working.
On the other hand, flashy trends, novel investment ideas, and shortsightedness rarely pays off. As much as we might be tempted to “buy this,” “sell that,” “invest in this,” it is always risky to stray from the proven investment track. That’s not to say I never allow my clients to experiment with their money a bit, but this experimentation always comes with a caveat: prepare to lose it. If you’re considering playing with money you can’t afford to lose, don’t do it. The risk isn’t worth the potential pain.
Even when the path seems uncertain, it’s best to keep a level head. Turn off the TV, log out of social media, and stop checking the stock market every fifteen minutes. Trust that your long-term planning can weather just about any circumstances. If you’ve worked with an experienced and prudent financial advisor, that should be the case. And if you need to, reach out to whoever helps with your investing and financial planning. Our job is to steer you in the right direction, no matter the circumstances.