Personal Finance

Don't Let Your Emotions Guide Your Investments


Question: Earlier this week when the stock market was going down I panicked and sold my entire IRA portfolio to cash. Of course, the day after I sold everything the stock market went right back up. I know you advisors like to say “stay the course” but I didn’t and am kicking myself. Your thoughts? --Joanne, NYC

Answer: Joanne, most of us encounter strong emotions when dealing with money issues. This is understandable because money has a lot to do with our feelings of success, safety and self worth. The trouble in your case, and many other cases, is when your emotions drive your investment behavior.

Emotions often will spark reactive, short-term decisions that end up being counterproductive to your long-term financial security. In the 90’s it was all about greed. Now, it’s all about fear. The world’s instability, played out in the media daily, makes people do things they normally wouldn’t do.

The events we’ve seen such as 9/11, military campaigns that followed, national security issues, the housing crisis, the mortgage crisis, the credit crisis, the government bailout of Freddie Mac and Fannie Mae, Lehman Brothers bankruptcy filing, AIG’s financial woes and the like – all can encourage people to make emotional decisions. In good times and in challenging times like these, you need someone or something that can act as a buffer between your emotions and your investment behavior.

If you’re not working with a trusted advisor, you may consider working with one who will communicate with you regularly, especially during times of heightened volatility. The comfort and reassurance he/she provides could be a smart investment and the difference between retirement success and failure.

Bill’s Bottom Line: To find a financial advisor in your area, talk with friends and people you trust to see who they work with. As an alternative, you can Google the term “financial planner” or “retirement” and that should illustrate a listing of local advisors. Finally, you should also consider conducting a financial planner search at , the official website for Financial Planning Association (FPA) members.

Bill Losey, CFP®, CSA, America's Retirement Strategist®, is the resident retirement planning expert on CNBC’s “On the Money”. He has been named one of America’s Top Financial Planners and is the author of Retire in a Weekend! The Baby Boomer’s Guide to Making Work Optional. Bill can be reached online at