Everyone saw it happen, but no one saw it coming. The stock market crashed and sent investors running for cover. As a society, people are extremely reactive and have a tendency to be prisoners of the moment. Investing can be a very scary activity, because let’s face it; investing involves risk – the risk that you can lose the money that you’ve invested. And that fear can be made worse by a number of factors:
- Taking too much risk for your “risk tolerance” – not being aware of how much risk you’re comfortable with before you start losing sleep.
- Taking too much risk for your time frame – if you need the money in a year, or a few years, it’s probably not appropriate for investments.
- Not knowing enough about the investments you’re in, and whether they’re appropriate for your situation.
Scared people react, and market movements are a testament to that fact. So, what’s the solution?