How emotions impact your investments

 

Fear can be a strong motivator. Newspaper headlines may scare us into pulling out of investments, when a better long-term strategy might be to stay invested. In times of stress, we sometimes buy what’s familiar; this strategy tends to limit diversification.

Consider these tips to avoid letting emotions negatively impact your investments:

Take advantage of dollar-cost averaging

Dollar-cost averaging is an excellent way to minimize market volatility and maximize returns. By purchasing the same dollar amount of investments on a regular basis, you buy more units when prices are low. Similarly, when prices are high, you’ll be purchasing fewer units. Overall, you may reduce your average cost per unit over the long term and take the guesswork out of when to invest.

Diversify

Choose a variety of investment funds with holdings in a wide range of securities, industries and even countries. Diversification allows you to avoid putting all your eggs in one basket.

With a group retirement and savings plan, professional fund managers make sure most investment funds are diversified – meaning you don’t have to worry about it yourself.

Keep your destination in mind

Stay focused on your own personal financial goals and investment personality. Don’t let outside influences like colleagues or the media sway your investment decisions.

Seek advice when you need it

Get advice from professionals during times of stress and uncertainty. They will help you understand any fluctuations in your investments that are making you uneasy.

If you’re a Canada Life group retirement and savings plan member, you can contact one of our client service representatives by calling Access Line at 1-800-724-3402, Monday to Friday, 8 a.m. to 8 p.m. ET.