Upticks: Fear and Greed

By Jake Falcon on June 3, 2021

Fear and greed are two emotions most people want to avoid experiencing, but it is only human to encounter them. On this week’s episode of Upticks, Jake covers two emotions that have a negative connotation, how we should embrace them, and how they can influence your investments.

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Fear and greed are two emotions most people want to avoid experiencing, but it’s only human to encounter them. I think there’s a negative connotation that if you’re scared, that’s a bad thing. Or if you’re feeling greedy, that’s also bad. I disagree. I’ve gone through training in recent years that taught me emotions are a good thing. After all, life would be rather dull if we didn’t experience emotions. As humans, I believe we can embrace our emotions while determining how to appropriately respond.

Let’s first talk about fear. Fear has served us well over human history—we’ve all heard “fight or flight.” If you were living in a cave where animals would attack you, fear was a good thing; it kept you safe.

In the context of investing, we often feel fear and anxiety because of something we hear on the news, or because one of our colleagues tells us a scary story about losing money, or because we’re worried about running out of money in retirement. These feelings are chemical reactions that tell us we need to do something; we need to take action.

Sometimes action is necessary. Sometimes you need to “fight or flee.” Other times, you simply need to do nothing. When our clients experience this fear and anxiety, I encourage them to set up a meeting with us so we can talk about it. Our team uses facts and we can share how you’re invested and how your portfolio is diversified. We can pull up your financial plan and run different scenarios. After doing all this, we can help you embrace that fear to appropriately respond rather than engage in an impulsive reaction.

Our clients hire Falcon Wealth Advisors because it can be difficult to go through this process on your own. Back in the days of cavemen, I assume they often had tribes and groups of people. And it’s easy to imagine that there were leaders of tribes who could share wisdom and help others make good decisions. At Falcon Wealth Advisors, we aim to be your guides, to help you manage your emotions when investing and planning your financial future.

Greed and the Stock Market

We haven’t heard much about fear and the stock market lately, as the market has risen steadily after declining nearly 30 percent during the COVID shock of March 2020. I’m pleased that at Falcon Wealth Advisors, we were able to buy stocks and bonds at a low point during that time, as these have been prudent investments for our clients. We didn’t let fear sink in last year, but instead approached the situation rationally and used math as our guide.

After months of strong market performance, it’s not surprising to see many investors experience the emotion of greed. When the market is doing well, you start hearing anecdotes from your friends and neighbors. “Oh, I made 50% on this,” or “I doubled my money on this investment.” That’s all fine and dandy. However, I think it’s important to note that it’s human nature to use hyperbole and to exaggerate when talking about those things.

While we can all agree that hurting someone else to get ahead is awful or that throwing your financial plan out of the window to chase a hot stock can be dangerous, feeling the emotion of greed isn’t always a bad thing. It’s how we react to that emotion that matters. If we invest a significant amount of our portfolio in “meme stocks” or cryptocurrencies because we think we can make a lot of money in a short period of time, we’re likely giving into the emotion of greed.

At Falcon Wealth Advisors, I believe our clients have worked too hard to risk gambling with their nest egg. That’s why we aim to be both unemotional in the management of your portfolio and empathetic to you and your feelings. We’ll avoid acting out of greed or fear, but can help you when you experience these normal and healthy emotions.

I hope this blog post leads to a greater understanding of fear and greed and how they impact us all as investors. If Falcon Wealth Advisors sounds like the type of team you would like to work with, please don’t hesitate to email me today at Jake@FalconWealthAdvisors.com

Clients choose to work with us to enhance their financial literacy and explain exactly what their financial plan means to them.

-Jake Falcon, CRPC®