The Effect of Letting Emotions Guide Decision Making
Volatility can be problematic to investors. First, there is the psychology of losing money–even professional investors are susceptible to making ill-timed decisions in the face of losses. Second, investors who bail when times get tough typically reinvest too late into a recovery. Investors who stayed the course would have been better off than those trying to time the market.
Over a lifetime of investing, volatility will make a significant difference in your clients’ net worth, so taking the time to prepare for it now by staying invested is well worth the effort.