Educational Disclaimer: Maple Wealth Guide provides general financial education only. We do not offer financial, investment, tax, or legal advice. Nothing on this website should be considered a recommendation. Always consult a licensed professional for personalized guidance.
Why Emotions Hurt Returns
Studies consistently show that the average investor significantly underperforms the market. The reason? Emotional decision-making. We tend to buy high (when excited about gains) and sell low (when panicking about losses).
This behaviour can cost investors 1-3% annually in returns—a devastating drag on long-term wealth building.
Common Emotional Traps
Fear During Market Drops
When markets fall, our instinct screams "sell everything!" But selling during downturns locks in losses and means missing the recovery. Markets have always recovered eventually.
Greed During Bull Markets
When stocks are soaring, it's tempting to go all-in or chase hot stocks. This often leads to buying at peak prices and suffering the subsequent correction.
Overconfidence
Past success can make us believe we can predict the market. We can't. Even professional fund managers rarely beat index funds consistently.
Strategies to Stay Rational
- Create an investment policy statement and stick to it
- Automate contributions to remove emotion from timing
- Diversify so no single loss is catastrophic
- Limit portfolio checking to monthly or quarterly
- Remember your long-term goals during short-term volatility
⚠️ Important: Turning off financial news during market turmoil can help. Headlines are designed to provoke emotional reactions, not inform rational decisions.
The Power of Doing Nothing
Often, the best investment decision is no decision at all. Studies show that accounts where owners "forgot" about their investments often outperform actively managed ones.
💡 Note: Set up automatic contributions and rebalancing. Then resist the urge to tinker. Your future self will thank you.
When to Seek Help
If you find yourself frequently checking your portfolio, losing sleep over market movements, or making impulsive trades, consider working with a fee-only financial advisor. Having someone to talk you off the ledge during turbulent times can be worth their weight in gold.
Related Educational Guides
About Maple Wealth Guide
Maple Wealth Guide is an independent Canadian financial education website. Our team of educational writers researches and explains investment concepts, retirement-related topics, and personal finance information for Canadians aged 50 and over. We are not licensed financial advisors and do not provide personalized recommendations. All content is for educational purposes only.