For most investors, investing comes with a strong emotional attachment. If stocks go up, it is easy to feel elated. If stocks go down, it is even easier to feel devastated. It’s only through experience in the market that we can learn how unbeneficial it is to be emotionally invested in our investments.
Because when investments go down, it doesn’t automatically equal a bad result. It’s a bad result if you need the money straight away to meet an obligation, but if you don’t, all it means is you may now have the opportunity to purchase more of the asset at a lower price.
This seems counter-intuitive we know, but it follows the classic saying of ‘buy low, sell high’.
At the end of the day, if you are investing, you are accepting that what you are buying is a fair price. If your investments temporarily go down, then you shouldn’t necessarily be afraid to be buying in these moments. This very straightforward investment strategy is called ‘buying the dip’.
If you are emotionally investing, this strategy may not make sense. That’s why being in control of your emotions during your investment career is so important. When the roller coaster happens – as it will many times in your investment career – consider taking the opportunity to buy more if it makes sense for your situation. If you believe the world will continue to produce value, and continue to earn a profit, then ultimately the stock market should go up again. The primary risk of course, is that it takes longer than expected for the market to recover, and you are forced to sell before that time comes.
One thing you learn in the long term is that crises are never as bad as they are predicted to be at the time – but also that good times are never as good as they are predicted to be.
If your only response to a falling market is ‘sell sell sell’, then perhaps you shouldn’t be in the market. Again, we know this is counter-intuitive, but even in a falling market your investment goals should be to control your emotions and stick to your strategy.
Raiz’s automated tools like recurring investments are so powerful because they can take away the emotion that usually comes with deciding to make an investment, and at the same time allow you to dollar cost average into the market.
For more information on investment risks please read the Raiz product disclosure statement and to learn more about Raiz fees, click here.
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Unfortunately, you will probably not be able to afford this licensed adviser and, for the same reasons that we need to write you a long disclaimer – compliance with laws and regulations in financial services has made getting suitable advice for your situation expensive, and it is getting more expensive every day.
You may be surprised to learn that RAIZ Invest Australia Limited (ABN 26 604 402 815) (Raiz), an authorised representative AFSL 434776 prepared this information.
We are not allowed, and have not prepared this information to offer financial product advice or a recommendation in relation to any investments or securities. If we did give you advice, which we did not, then the use of the Raiz App would be a lot more expensive than the current pricing – sorry but true. You therefore should not rely on this information to make investment decisions, because it was not about you for once, and unfortunately, we cannot advise you on who or what you can rely on – again sorry.
A Product Disclosure Statement (PDS) for Raiz Invest and/or Raiz Invest Super is available on the Raiz Invest website and App. A person must read and consider the PDS before deciding whether, or not, to acquire and/or continue to hold interests in the financial product. We know and ASIC research shows that you probably won’t, but we want you to, and we encourage you to read the PDS so you know exactly what the product does, its risks and costs. If you don’t read the PDS, it’s a bit like flying blind. Probably not a good idea.
The risks and fees for investing are fully set out in the PDS and include the risks that would ordinarily apply to investing. You should note, as illustrated by the global financial crisis of 2008, that not even professionals in the financial services sector understand the ordinary risks of investing – because by their nature many risks are unknown – but you still need to give it a go and try to understand the risks set out in the PDS.
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Any opinions or information expressed are subject to change without notice; that’s just the way we roll.
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