Investing

Is Skydiving Scarier Than Investing Your Money?

I am deathly afraid of heights. As I sat on a plane slowly clawing through the clear blue sky on a beautiful day, with my leg tapping involuntarily and sweat soaking my clothes, I began questioning my decision. When they motioned for me to shuffle to the door, my heart was pounding like a sledgehammer against my chest and I could barely catch my breath. “One… Two… Thr”

I tumbled out the door into the cold atmosphere and in an instant, everything changed. It was amazing—I wanted to float in the sky forever. The canopy opened and slowed our decent to a peaceful glide back to safety. It was an experience I’ll never forget and hope to repeat several times. I even thought about proposing to Sara during a skydive until I learned she’s done it in the Swiss Alps and Hawaii. The lady has style.

I share this story to demonstrate a point. Emotions, fear in this case, are a breeding ground for poor decisions. It felt uncomfortable to jump out of a plane and for many investors, it is very uncomfortable to buy when things seem bad or sell when things seem good. However, it’s those types of counter-intuitive decisions that keep you safe—like pulling the rip cord to open your parachute. When it comes to money, fear can destroy the best of intentions and cause irreparable damage. Helping people to make wise decisions, despite their emotional instincts, is perhaps one of the most important things we do.

I read an article this morning (click here for the article) that highlights emotional decision making with catastrophic implications. The craziest part is this decision is being made by a group of extremely intelligent people and will affect our entire country!

When I read this article, a chill ran down my spine because it describes a terrible decision at the exact worst time. I’ll equate selling oil now with selling stocks in February, 2009. It’s an emotional decision—but I can’t tell whether it’s fear or greed. It’s either a scarcity mentality resulting in a fear based decision or the greed of taking something that they shouldn’t take.

          There is no shortcut to success. You need to find the courage to face your fears and act when others run away.

Investing requires strategy and discipline—absent all emotion. If it’s a challenge for an advisor to help people make wise decisions when times are tough, imagine how much harder it is to do on your own.

Have a safe and happy Halloween!