Financial Planning – Are you a risk taker or risk adverse?
So you think you’re not emotional about money
Your attitude towards money is likely to be based on a number of things which may include past events, personal beliefs or preferences. And did you know that when you make a decision, research has now shown that it’s based at first instance on emotions rather than rational thinking. All of which can be bad news for your finances.
So how does that effect your finances and future?
Your emotions or beliefs may unconsciously dictate how you manage your portfolio and investments. That may mean assessing future performance against recent performance even if there are warning signals to sell up. Or it may mean sticking with something that your family has invested in for generations even if it’s performing badly. Or it may just mean that more risky but high gain investments are not for you because all the worry gives you an ulcer.
Being over confident doesn’t help either as you may be more likely to make rash and unrealistic investments or under estimate potential losses.
So how do you know and what should you do?
Cue sound financial planning and advice by someone who can use psychometric testing to work out your attitude to risk and then adjust your portfolio and investment strategy accordingly. It should be a key part of your financial planning process and if you and your advisor understand how you react, you can both manage your reactions and your portfolio more effectively and more successfully. It’s not rocket science but it can make the difference between a gloomy or bright looking future.
Don’t get all emotional, call us today and let’s work out your attitude to risk and investments