Half of investors admit to making impulsive, emotional decisions, and many go on to regret it

Posted on

While investment decisions should be based on facts, many investors find their decisions are sometimes influenced by emotions. Whether you’re excited about an investment opportunity, or worried about market volatility, keeping emotions in check can help you make better investment decisions.

According to research from Barclays, half of investors admit to making impulsive decisions based on their emotions. While these decisions can seem right at the time, 67% of investors said they go on to regret their choice. Worries during short-term market volatility are often associated with making knee-jerk decisions. If you see the value of your investments fall, it’s natural to want to make changes. However, the study found that other emotions play a role in impulsive investment decisions, including:

  • Excitement (34%)
  • Impatience (21%)
  • Fear (16%)

Letting emotions play a significant role in your decisions can mean you make choices that you wouldn’t normally or that don’t fit into your financial plan.

What can you do to reduce impulsive investment decisions?

While you can’t remove the emotions you feel when investing, there are things you can do to reduce the chance of you making impulsive decisions and recognise when emotions are affecting your thought process.

1. Keep in mind where you get information from

In modern life, you’re surrounded by news and information that could affect how you view your investments. It’s important to keep in mind how reliable the information is and how it relates to your circumstances.

When asked what influenced their investment decisions, 32% of respondents said “social media” and 31% said “friends”. While both of these can be useful sources of information, they can also lead to you making decisions that aren’t right for you. Such information may be inaccurate or biased. There’s no one-size-fits-all strategy when investing either. So, while a friend may have made an investment decision that’s right for them, it doesn’t automatically mean it makes sense for you too.

Taking a step back before you make an investment decision can help you review what it’s based on and how reliable the source is.

2. Have faith in your investment plan

Almost a third (30%) of investors said they’d made an impulsive investment decision due to the “fear of missing out” (FOMO). If you’ve heard of a great investment opportunity, it can be tempting to invest yourself. While some of these may be a good option for you, it’s important not to be impulsive and to weigh them up carefully. Having confidence in your financial plan can help you look at opportunities objectively and see how they’ll fit into your long-term goals.

3. Keep your long-term goals in mind

Investing can involve a lot of ups and downs. That’s why a long-term plan is important. Ideally, you should invest with a minimum time frame of five years with an investment strategy that reflects this. However, it can still be easy to let short-term market movements affect your decisions and how confident you feel about the decisions you’ve made.

The survey found that 6 in 10 investors feel like they need to constantly monitor their investments. Keeping an eye on performance can ease feelings of anxiety you may have if investments have increased in value or remained stable. However, it can also mean you’re more prone to reacting to short-term fluctuations in the market. While investment values may fall, historically, markets have recovered.

While guarantees can’t be made when investing, it’s important to review your investments with a long-term outlook. Reacting to short-term falls could mean you miss out on long-term gains and harm your overall plan. That’s not to say that you should never make changes to your investment portfolio, but, rather, these decisions should be based on information rather than emotions.

Working with a financial planner can help give you confidence in your financial plan. It also means you have someone to talk to if you’re thinking about making changes to your investment strategy, whether based on emotions or other factors. If you’d like to discuss your investments and how they can help you achieve your aspirations, please contact us.

Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.

 

We aim to keep our clients up to date on interesting and relevant financial news.

You can sign-up to receive our monthly newsletter by email, even if you’re not yet a client. Sign-up using the form below.

Client testimonials

I have always found Black Swan to be caring and understanding of my quirky lifestyle. I always feel they try to get me the best returns while respecting my current needs.

Sally Muir

A client since 2011

We would be very happy to recommend the support and service we receive.

Valerie Locks

A client since 2010

I have always been completely useless regarding finance - thankfully our financial adviser is not! I've retired with far more than I ever expected and investments continue to grow safely. So - thank you!

Bernadette Jane Warner

A client since 2000

Very happy with the professional service I have received and feel a lot happier now with my finances put in order.

Martin Field

A client since 2011

Julie Cooper was recommended to me by a work colleague. She has been very helpful, professional and has explained everything well. I would definitely recommend her services to anyone else who are interested in a financial review.

Steven Rooke

A client since 2018

…Service has been first class.

Hugh Fells

A client since 2012

My face to face meetings with Rob Young and Jessica Lyons have always been very open and understandable. My questions have been answered clearly and I have left feeling that my financial matters are in good hands.

Sandra Jack

A client since 2000

[A] safe pair of hands in a complex financial world.

Gary Middlehurst

A client since 2003

A reliable company with good communication skills and good knowledge of the financial markets.

Alan Evetts

A client since 2014

Maureen Pembridge is a long-time trusted advisor to our family. The market might fluctuate but her attention to detail is consistent.

Linda Burnard

A client since 2000

I am pleased to recommend Julie as a trustworthy financial advisor. She explains financial jargon in plain language, and always listens carefully to my particular financial needs and has helped me make the best of my savings.

Carolann Samuels

A client since 2010

I have always been satisfied with the way that Black Swan has handled my account. And I have always found the staff very helpful whenever I need to call the office.

Robert Anthony Matthews

A client since 2012

An excellent personal service from a person I know and trust.

Michael Dalton

A client since 2010

I am getting a very good services from Black Swan, they have got my investments sorted out which was in a bit of a mess.

Roy Jakens

A client since 2012

A good, efficient team providing clear ideas to shape a winning strategy.

Adrian Michael Levenstein

A client since 2011

Black Swan is a company to be trusted, with friendly staff and professional advisors.

David Brian Jennings

A client since 2017

I have been with Black Swan for many years. I have never wished to change anything. They give a good straight forward service.

Martin Barrett Brooks

A client since 2010

Andy Peters has been invaluable in firstly combining several pension pots and then giving excellent investment advice. It has given us a great deal of comfort to know that our financial affairs are in such good hands.

James Guillum Scott

A client since 2014

I find my financial advisor easy to talk to and feel that she understands my lifestyle. She is always available for help when I need her and explains in words that I can understand.

Margaret Ena Glasgow

A client since 2000

Andy is a first rate Director, excellent communicator and leader.

Ross Perry

A client since

Black Swan Financial Planning and Andrew in particular, are very clever at working out how risk averse we are, and coming up with solutions that we feel comfortable with. We are happy in the knowledge that we can continue to enjoy a comfortable retirement. Andrew Peters is a very, very friendly person who is great to chat to and easy to deal with. He explains things very clearly in layman’s terms, and if we still don’t understand, he explains it until we do!

Alan & Jane Dyer

Clients since 2012

We have always found Rob [Young] to be very approachable and knowledgeable. We have every confidence in the advice given and feel comfortable with the decisions we’ve made. There are certain opportunities that we wouldn’t have known about if Rob hadn’t brought them to light, which makes the advice good value for money as far as we’re concerned.

Peter & Pauline O’Halloran

Clients since 2013

Rob [Young] is extremely knowledgeable. I knew nothing about the different types of trusts which will not only secure my income in retirement, but also leave a legacy for my children. I’m glad that I sought his advice when I did.

Sarah Wilson

A client since 2015

I am extremely happy with the service afforded to me by the company and my adviser Julie Cooper.

Geoff Coxell

A client since 2010

My wife and myself have been dealing with Black Swan for a number of years. We have met with different representatives from the company over the years and have found all very helpful in their own way. We met with James [Anderson] a few years ago and found him very helpful and knowledgeable. He keeps in contact with us on a regular basis. We find the Company information very helpful and we feel very secure with our finances.

Andrew Kirchen

A client since 2015

I have always found my adviser to be easy to contact, very professional in his approach, yet friendly and understanding. I have a sense of an experienced company behind him, really on the ball financially and with good standards.

B McBean

A client since 2011

Partner with the most reliable and experienced team of advisers

Enter your details & we'll be in touch to discuss your needs.
Alternatively, contact us directly and speak to a member of the team.

    Subscribe to our newsletter