Recently lost your job? You will likely wish you had a higher emergency fund than when you still had a job.
Your favourite stock in free fall? You will probably not be as optimistic about the stock than before it crashed.
KiwiSaver is falling like in March last year? Many people sold into more conservative funds, cashing in large amounts of losses.
Hot stocks that everyone is talking about? Often people will then buy when the hot stock is already over priced. The gravy train is likely to have already passed by the time you hear about it.
Hurt by recent stock market declines? Chances are you will be a more conservative investor in the future. It took many investors caught in the 1987 market crash many many years before they even started investing again, if at all.
Experienced large increases in your house value over the last 10 years? It’s natural to think this will continue, but BECAUSE of recent price increases, it’s more likely for price increases to slow down.
Tolerance for risk should be relatively stable, only moving with your changing goals or timeframes. Yet, many of us change our tolerance for risk on a whim, based on today’s happenings.
It’s important to recognize how you may be swayed by recent events and what impact that may be having on your finances. Often, logic and discipline are not being used. Decision making is frequently skewed to short term thinking based on recent events, which is dangerous, because long term returns come most to those who can remain long term thinkers and disciplined.
The information contained on this site is the opinion of the individual author(s) based on their personal opinions, observation, research, and years of experience. The information offered by this website is general education only and is not meant to be taken as individualised financial advice, legal advice, tax advice, or any other kind of advice. You can read more of my disclaimer here