It might sound wise to try avoiding losses, but taking it too far could keep you from realizing your long-term financial goals. Loss aversion is a cognitive bias that studies have proven over and over again, but that fear, when applied to buying and selling investments for long-term financial goals, can hold you back.
Here are three steps for overcoming the fear of loss aversion when planning your finances:
- Give careful thought to your time frame and what your true long-term investment risk tolerance is. Look at the bigger picture by establishing a financial plan. Have some diversity in your portfolio and have the confidence to stick to the plan, even when conditions or circumstances get more volatile.
- Study long-term market data. If your investment or portfolio has lost value, consider the root cause. Is it a case of periodic market volatility, which has historically lead to recovery and upward momentum? Or, is a particular security no longer an appropriate fit to your plan?
- Rely on outside professional help who can be an objective third party. An experienced financial advisor can offer perspective, in addition to wealth planning and investment service support.
Counteracting loss aversion by educating yourself on risk and how it affects a long-term plan can be the key to achieving your financial goals. If you need help with financial planning and long-term financial goals, contact a financial advisor at TFCU Financial Advisors today.
TFCU Financial Advisors
6501 Tinker Diagonal, MWC
(405) 737-0006
TFCUFinancialAdvisors.org
Securities are offered through RAYMOND JAMES FINANCIAL SERVICES, INC., Member FINRA/SIPC, and are not insured by NCUA or insured by any other government agency. Funds are NOT GUARANTEED nor are they deposits or obligations of the credit union or any affiliated entity of the credit union, and are subject to risk, including the possible loss of principal. Tinker Federal Credit Union, Tinker Financial Services, LLC and TFCU Financial Advisors* are not registered broker/dealers and are independent of Raymond James Financial Services, Inc. Investment advisory services are offered through Raymond James Financial Services Advisors, Inc., a non-affiliated third party provider to Tinker Financial Services, LLC and Tinker Federal Credit Union. All investments and information are intended for U.S. residents only. *TFCU Financial Advisors is a registered trademark and ‘dba’ of Tinker Financial Services, LLC. Raymond James financial advisors do not render advice on tax or legal matters. You should discuss tax or legal matters with the appropriate professional.