{"id":1130,"date":"2014-08-14T16:47:21","date_gmt":"2014-08-14T16:47:21","guid":{"rendered":"http:\/\/vhfinancialmanagement.com\/?p=1130"},"modified":"2014-08-14T16:47:21","modified_gmt":"2014-08-14T16:47:21","slug":"fear-and-greed","status":"publish","type":"post","link":"https:\/\/vhfinancialmanagement.com\/2014\/08\/14\/fear-and-greed","title":{"rendered":"Fear and Greed"},"content":{"rendered":"
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There are two emotions that can derail an investment plan faster than a Nolan Ryan fastball: fear and greed. Fear and greed tend to push investors in the wrong direction at the wrong time.\u00a0 Let\u2019s take a look at these two emotions and how they can impact your portfolio.<\/p>\n

Fear<\/strong><\/p>\n

Fear is a great motivator, and it\u2019s easy to find common examples today as it relates to investing.\u00a0 Simply turn on your TV and wait for the next commercial pushing gold and silver as a safe haven against the next great downturn.<\/p>\n

Often a retired actor states that he will only trust his hard earned assets to gold.\u00a0 Well, the last two years have not been friendly for this investment strategy.\u00a0 Gold was near $1800 in the fall of 2012\u2026.today the price sits a little above $1300 per ounce.\u00a0 That\u2019s a decline of over 25%!\u00a0 Doesn\u2019t sound like much of a safe haven to me?<\/p>\n

An investment strategy based on fear is flawed.<\/p>\n

Greed<\/strong><\/p>\n

The market has been very strong for the last five years or so.\u00a0 Matter of fact, in the same period (two years) that gold prices fell greater than 25%, the S&P 500 rose over 45%. It\u2019s tempting to slide towards the greedy side of the isle and dump all of your assets into the S&P 500.\u00a0 Wouldn\u2019t it be great to see your money grow at such incredible rate of return?<\/p>\n

The problem is, just like gold, there is no guarantee.\u00a0 You\u2019ve heard that past performance is no guarantee of future performance\u2026..and it\u2019s true! Overloading in equities can be dangerous as well.<\/p>\n

Balance<\/strong><\/p>\n

So what\u2019s the answer? Simply put: it\u2019s balance.\u00a0 When we let fear and\/or greed drive our investment decisions we tend to take a divergent path to balance.\u00a0 Balance requires discipline.\u00a0 Think back to late 2008 and early 2009 when the market was tanking.\u00a0 Any decision based on fear would have been painful. Sticking to the plan and riding out the storm proved (once again) to be the prudent strategy.<\/p>\n

We\u2019ve recently seen market highs. We\u2019ve seen solid performance from the market the last 5 years, so it may be tempting to over-weight equities based on past performance. Again, it\u2019s important to remain balanced and not fall prey to fear and greed.<\/p>\n

Implementing a balanced portfolio is not always an easy task to handle without professional assistance. Having someone to hold you accountable and pull you away from the temptations of fear and greed is a valuable asset!\u00a0 If you need help creating a balanced portfolio or you feel you are on the edge of making an investment decision based on fear or greed, The Alliance of Comprehensive Planners<\/a> (ACP) is a great place to look for assistance.<\/p>\n

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