Fear and the uncertainty it creates is the biggest motivator for investors. Unfortunately, that misdirected motivation can cause big loses in your portfolio.We’ve now seen the initial effects of Brexit. Instead of selling your stock, how about stepping away from the news and taking a deep breath or maybe even a walk? Why not pet your dog or eat some chocolate instead? This article is about money, panic and the stress that causes you to make poor investment decisions.
I feel your pain. I even fought the urge to call my trusted financial advisors, Ann and Mitch. I understand that Brexit is all over the media, and that the market reacted from fear, with the Dow Jones Industrial Average closing down 610 points on Friday, June 24 and the S&P 500 Index down 76 points. The only investment that seemed to move in an upward direction was gold, increasing 56 cents as a reaction to the news and a “move” to something tangible that you can touch and feel. We saw institutional investors flee from stocks into precious metals, government bonds and money markets. It is estimated that global stock markets lost $2 trillion in value on Friday.
Fear
As humans, we are wired to deal with surprise and fear, and the process is completely unconscious. This flight-or-fight response that our brain automatically activates has allowed us to survive when the going suddenly gets tough. Our brain sends out the warning signals to our body to tell it to get ready to act. Our adrenaline kicks into our blood stream, our heart rate quickens, our pupils dilate to take in as much light as possible, our blood pressure rises, our hands get sweaty, our muscles tense, and even our nonessential systems (like digestion and our immune system) shut down to allow more energy for our the pending emergency. We are physically and mentally primed for action.
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