How To Go Through An Investment Loss
If you’re involved in investing, you surely suffered an investment loss at least once. While there are always minimal ups and downs, some major losses in investing can be hard to overcome, resulting in a quite bad trauma that can have big consequences on your earnings.
It is also quite common for investors that have dealt with major investment losses to go through 5 stages of grief: denial, anger, bargaining, depression and acceptance according to Kevin Heaton, the founder of i3 Family Office and Private Asset Management in Lexington, South Carolina.
However, instead of crying over the spilled milk, it might be wiser to have an action and recovery plan that will help you move on with your investing plans. But in order to stay with your head and emotions clear, you need to know how to calm yourself down first.
So let’s see what are some basic ways you can turn your investment loss into something useful for you.
Pause When You Take A Loss
The last thing you want after an investment loss is to act straight away. After it happens, you should be aware that you might be overemotional which can affect negatively your decision making and lead to poor choices in investing in future. Wait until your emotions settle down. You will see that your thinking will be much clearer after you have waited for that emotional gut punch to pass.
If you’re tempted to overcompensate for your loss, remember that being desperate and reckless in your decisions can usually only lead to greater losses. Instead, wait and calm yourself down, and consult a trusted financial advisor that can help you come back on the track.
Also, a great thing to do is to analyze what could have caused the loss. Surround yourself with people that are experienced in this field, and that have went through major investing losses, is definitely a great way to engage yourself in logical, critical problem solving and figure out what went wrong in the process.
Heaton also suggests that it might be good to take a break from the situation and spend your time with family and friends. This way your mind will be able to wander a little bit and you might be able to get a wider perspective of the situation.
After you have accepted your investment loss with ease, try to think about the ways you could have affected your investment turn out. Did something similar happen to you before? Are you repeating the same mistake?
When you thought everything through, you will probably realize that there is some pattern in your decision making that you should break. If this task seems too difficult consult a professional and continue with your investing.
Adjust Your Expectations
However invested in his life knows that you always have an expectation of how things will go. But in order to invest wisely, it is wise to have an idea of circumstances that would make you leave the investment and move on.
Matthew S. Miller, principal and wealth advisor at Upleft in Port Angeles, Washington says “When you need to let an investment go, there is one simple question to ask yourself. Forgive yourself for any prior decisions, forget about the past and ask yourself this one question: ‘If I woke up today with no investments, would I invest my money the same way it is today?’ If the answer is ‘no,’ then you owe it to yourself to make a change.”
Investments all depend from the way markets flow and fluctuate. Therefore it is important to know your financial ABC and have minor forecasts of how your investments might go, what they could bring you and after what period of time. Look at an Ibbotson SBBI chart in order to see how the market fluctuated in the past century. That will provide you with a broader view on the situation.
At the moment of investing, be aware of the possible losses. Adjust your expectations so you can be prepared for each situation. Usually, investors that do best, plan their loss scenarios ahead, so when something like that happens, they are ready to move on and know exactly who to contact and what to look for.