Investing while drunk? Seriously?
Working with a financial advisor can reduce risk of making regrettable investment decisions. Especially while inebriated.
When it comes to regrettable decisions, investing while drunk would be hard to top. Nevertheless, one-third of investors have done just that, according to a recent MagnifyMoney survey.
Emotions can play a role in major financial decisions such as buying a house or paying for college, but more-calculated, logical decisions not based on fleeting feelings might be a better investment strategy. MagnifyMoney researchers surveyed more than 1,100 investors to learn if they let emotions influence their portfolios.
- Two-thirds of investors have made an impulsive or emotionally charged investing decision they later regretted. This is more common for Gen Zers (85 percent) and millennials (73 percent) than Gen Xers (60 percent) and baby boomers (54 percent).
- Thirty-two percent have traded while drunk. This includes 59 percent of Gen Z investors who have bought or sold an investment while inebriated, more than any other age group.
- Consumers who manage their own portfolios generally have a harder time keeping emotions out of investing than those who rely on a financial advisor. Those who self-manage their investments report higher rates of lost sleep and regrettable decisions than those who use an advisor.
- Most investors (58 percent) agree their portfolio performs better when emotions are left out of the equation, but that’s easier said than done. Nearly half (47 percent) report difficulties keeping emotions out of investing decisions.
- Thirty-seven percent of investors have lost sleep worrying about the stock market, and 30 percent have cried over investing. The top reasons for tears include losing money in the stock market (43 percent), feeling overwhelmed (36 percent) and selling too early (34 percent).
Investors who manage their portfolios are more likely to make — and regret — impulsive investing decisions than those who let a financial advisor manage their portfolios. Of those who make their own investments, 71 percent have made a regrettable decision, compared with 59 percent of those who take a more hands-off approach.
Those who manage their accounts also are more likely to struggle to keep their emotions at bay than those who use a financial advisor. Although most investors — 58 percent — agree their portfolios perform better when emotions are left out of it, half of the investors who manage their own accounts report struggling to do this, compared with 45 percent of investors with financial advisors.
Ismat Mangla, senior content director for MagnifyMoney, makes these recommendations for keeping emotions in check when making investment decisions:
- Set it and forget it. Investing doesn’t have to be stressful, and it’s an important component of building wealth and savings for the future. Mangla prefers a long-term investment strategy such as regular contributions to low-cost, broad-market index funds and exchange-traded funds. “Think long term with the understanding that there will be some down years but that you’ll likely come out well ahead if you plan smartly based on when you’ll need those funds,” she said.
- Know your risk tolerance. Any investment comes with a certain level of risk, but how much risk you’re willing to take is up to you. Although a healthy investment portfolio is important, it shouldn’t take priority over your regular living expenses or emergency savings. “Generally, invest money that you won’t need for five years or more,” Mangla said. “If you’re investing money that you need to access soon, you’ll naturally be stressed — and face bigger risk as well.”
- Leave it to a professional. You don’t need to have a certain college degree or be an expert to make money in stocks. It might be worth your time to educate yourself on investing, but hiring a financial planner can take the hassle out of figuring it all out on your own. “The best thing you can do to alleviate money stress is face your financial situation head-on and start planning ahead,” she said.
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