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FINANCIAL PLANNING
T T H H E E P P S S Y YC C H HO OL L O O G G Y Y OF INVESTING
The definition of an investor is a person or organization that puts money into financial plans, property, etc., with the expectation of achieving a profit. However, most people have a very different idea as to how the most profit can be achieved. Some people believe that real estate is the best investment while others believe that the equity markets are the best way to achieve
a profit. Another example to consider is cryptocurrency, which seems to be the latest “get rich quick” scheme. Regardless of the type of investor you are, I’m sure you have heard the phrase, “buy low, sell high.” This seems self-explanatory, right? Everyone seems to have it all figured out up until they experience some volatility. As soon as things are low it seems that investors are too scared to pull the trigger and buy. There’s this mental block and it tells people that things
will get worse, then it will be time to buy. Eventually, guess what happens? Things
get better. The value of the investment you were considering recovers and you very likely missed out on the opportunity. I want to break down why this is and share a few examples about how your emotions can get in the way.
FOLLOWING THE HERD
Have you ever made a decision based on something that others have done? I know I have. Sometimes when you look around and see everyone doing one thing, you start to question yourself and wonder why you’re not doing the same thing. You start to wonder, “Is there something I’m missing here?” This is called herd mentality. Many people are comfortable with herd mentality, which is totally fine, I would just be sure to look
by Cade Peterson, Financial Planning Advisor
into the leader of the pack and decide for yourself if they are worth following. A prime example of this are so-called investments like cryptocurrency. Some people believe this is the next greatest way to build wealth. There has been an investigation going on recently into Sam Bankman-Fried, the founder of the cryptocurrency Exchange, FTX. U.S. prosecutors are building a case that he improperly transferred hundreds
of millions of dollars close to the time
he filed for bankruptcy. The point here
is that people have invested hundreds of millions of dollars in crypto on the FTX platform. Some people chose to follow
the philosophies of Sam Bankman-Fried and many lost everything they invested. They developed a herd mentality to entice everyday Americans to use this exchange to “build wealth.” Another example here
Talk to a financial advisor and make sure they ask you about your goals and what you want your money to do for you.
148 SPEEDHORSE January 2023