Fear & greed

Here’s a way to make your investment decisions; buy when markets are high (and investors are greedy), sell when markets are low or volatile (when investors are fearful).

As an investment philosophy, it’s contrary to common-sense. It’s more than likely based on emotions, not logic. You probably already know that.

The legendary investor Warren Buffett is well known for his quote, possibly misquoted or taken out of context, that you should, “Be fearful when others are greedy and greedy when others are fearful”.

What Buffett is telling us is we need to find ways to do the opposite of the pattern described in the excellent illustration above, which is from Carl Richards.

Instead of getting caught up in the euphoria and hype often associated with rising investment markets, you need to find a way to remain calm and rational.

Rather than getting caught up in the fear and panic we often see when markets are falling, you have to choose a strategy which removes the emotion from investing.

How do you do this? Working with an Independent Financial Planner is one solution.

Part of the value in what we do is the behavioural coaching we provide; keeping investors focused on long-term goals and helping them stick to a regular investment plan.

Because when you invest based on a long-term Financial Plan, following an agreed asset allocation strategy and rebalancing your portfolio at scheduled intervals, you can avoid the fear and greed cycle so often experienced by investors who lack the benefit of professional advice.

How will you invest in 2015? Based on fear and greed, or because of a long-term Financial Plan.

It’s your choice.