WHY EMOTIONAL INVESTING CAN
HURT YOUR RETIREMENT PLAN
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Tyler Cunningham,
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Tessa Hall
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About This Episode
Market volatility can be unsettling in retirement, but reacting emotionally may create risks beyond the market decline itself.
In this episode of Healthy, Wealthy & Wise, Tessa Hall speaks with BWFA Financial Planner Tyler Cunningham about emotional investing and the decisions retirees may make when markets become uncertain. Tyler discusses panic selling, fear of missing out, market timing, and the temptation to chase investments that suddenly become popular. He also explains why maintaining a long-term perspective and understanding your portfolio’s structure can help during periods of uncertainty.
What You’ll Learn
How can emotional investing affect your retirement portfolio?
Emotional investing can lead retirees to make major portfolio changes based on short-term fear or excitement rather than their long-term financial plan. Tyler shares an example of an investor who moved an approximately $3 million portfolio to cash during the COVID market decline. That decision locked in a roughly 30% loss rather than allowing time for the portfolio to potentially recover.
Why can panic selling be especially damaging in retirement?
Panic selling turns a market decline into a realized investment loss and may disrupt a strategy designed to support a retirement for decades. Retirees may understandably feel more protective of assets they spent years accumulating. However, Tyler emphasizes the importance of understanding how cash, fixed income, and other investments are structured before abandoning a long-term strategy.
How does “fear of missing out” influence investment decisions?
Fear of missing out can encourage investors to chase popular investments based on recent performance or conversations with others. Tyler discusses examples involving gold, IPOs, cryptocurrency, and individual companies. Allocating a significant portion of a retirement portfolio to a single investment can introduce additional risk, particularly without a clear exit strategy.
How can retirees make better investment decisions during market volatility?
Retirees can begin by evaluating a potential change against their long-term investment strategy, risk tolerance, financial needs, and overall retirement plan. Tyler recommends discussing major decisions with an advisor before acting on short-term market movements. A diversified portfolio and a clear understanding of its purpose can provide a valuable perspective when markets become uncertain.
More from the Investing In Your Retirement Series
Episode 1: Could Your Withdrawal Strategy Hurt Your Retirement?.
Episode 2: How Much Cash Should You Keep in Retirement?
Episode 3: How Conservative Should Your Retirement Portfolio Be?
Episode 4: Why Emotional Investing Can Hurt Your Retirement Plan