Navigating the Emotional Factors of Long-Term Investing April 14, 2023

Investing for the long-term can be a challenging and emotional journey. Just like a game of Jenga, one wrong move could affect the whole foundation. Have you ever invested in an asset, telling yourself that I am investing for the “long-term”, only to see the asset value drastically decrease in the next few months? If your answer is yes, then i’m glad to tell you that you’re not alone. I was in the same position once and even started asking myself if I have made the right decision.

It is natural to feel nervous when the stock market takes a downturn, but it is also important to remember that investing is a marathon, not a sprint. The danger of emotions during investing for the long term can lead to impulsive decisions that could hurt your financial future.

Here are four factors to be aware of so that you can better navigate the emotional minefield of long-term investing:

1. The Fear Factor

The stock market can be a scary place, especially when the news is filled with stories of market crashes and economic turmoil. Events like the Russia-Ukraine war; tensions between US and China, or even inflationary pressures, create uncertainty for investors on a global scale. It is easy to get caught up in fear and panic, but it is important to remember that fear is a natural part of investing. The key is to avoid letting it take control over your investment decisions.

2. The Greed Factor

On the other end of the spectrum, there is greed. It is tempting to make quick profits. You would have heard of friends who put all their money into a single speculative trade, or even into lottery tickets, in order to “win big”. However, that is essentially “gambling” in a nutshell. We can get so distracted by the potential of huge gains that we end up losing so much more.

It is important to resist the urge to make impulsive decisions based on short-term market movements. Greed can often lead to overinvesting in a particular stock or market sector, which can be risky and unsustainable in the long-run.

3. The Discipline Factor

Discipline is key when it comes to long-term investing. It is important to stick to your investment plan and avoid making impulsive decisions based on your emotions. A well-diversified portfolio and a solid investment strategy can help you weather the ups and downs of the stock market and reach your long-term financial goals.

4. The Patience Factor

Investing for the long-term also requires patience. The stock market can be volatile in the short-term, but over time, it has historically proven solid returns. It is important to remember that your investment portfolio should have a long-term horizon and that short-term market fluctuations are normal, where chasing the dip will see asset prices dip further.

In conclusion, investing for the long-term can be an emotional journey. However, it is important to remember that your emotions should not drive your investment decisions.

By being disciplined, patient and avoid making impulsive decisions based on fear or greed, you can navigate the emotional minefield of long-term investing to reach your financial goals.

If you would like to know more about the different investment products that are suitable in order to achieve your financial goals, you may visit the POEMS website or head down to any of our 10 Phillip Investor Centres to find out more.

Alternatively, you may also wish to try out FinanceFit, a free financial tool that helps to assess your financial health status as well as your progress towards achieving your financial goals.

While waiting for the right investment opportunities, you might be wondering, what are other cash management solutions where you can park your idle cash? T-bills and Fixed Deposits have a lock-in period, which means that you are unable to mobilise your cash in times when the market is in your favour. Banks generally offer low interest rates for their traditional savings accounts whereas their step up accounts have a capped deposit limit and require you to hit a certain criteria in order to be eligible for higher returns.

Consider Phillip SMART Park instead! It is an excess funds management facility where you can enjoy flexibility (no lock in period) and no cap limit to grow your idle cash.

SMART Park invests in one of the largest retail SGD Money Market Fund, Phillip Money Market Fund based on the total asset figures reflected in FundSingapore.com, which has had no defaults since its inception in Year 2001. SMART Park allows you to park your idle cash and enjoy returns on deposits in both SGD and USD with a minimum account balance of $100 when you opt-in for the facility with POEMS account.

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For enquiries, please email us at digichannel@phillip.com.sg.