Page 60 - Senior Link Magazine Summer 2025 - Online Magazine

SENIOR RESOURCES

Mastering Fear and Greed:

A KEY TO

SMARTER INVESTING

by Redina Franklin

inancial markets are often clear warning signs because they “Cut your losers quick, and let your
described as a battleground didn’t want to miss out on “easy winners run.”
Ffor emotions, where fear and money.” This fear drives people to
greed rule supreme. As primal as chase trends and make decisions How Fear and Greed Impact
they are, these emotions can either that conflict with otherwise rational Performance
empower or hinder your investment judgment. The effects of fear and greed
decisions. Whether you are new to on investment performance are
investing or a seasoned veteran, you The Double-Edged Sword of Greed striking. Consider the example of
will constantly battle both emotions. Greed, though less intense than three hypothetical investors:
To become a successful investor, you fear, is another primal emotion
must understand and manage these that has propelled humanity Investor #1 follows a buy-and-hold
psychological forces. strategy without selling for any
toward progress. In investing,
“Master your emotions or they will greed can lead to groundbreaking reason.
master you.” ~ Thibaut Meurisse achievements but also risky Investor #2 employs a rule to
behavior. sell when the market drops 10%
The Role of Fear in Investing
Greed to make money is a powerful annually, limiting losses.
Fear, a survival instinct embedded motivator, driving individuals Investor #3 sells when the market
deeply in human nature, has to pursue financial success. rises above 10%, capping gains.
protected us from threats for However, it can also tempt them
centuries. However, when it comes into speculative ventures, such Over time, Investor #2 outperforms
to investing, fear takes on two as investing in overhyped and the others, demonstrating the
distinct forms: the fear of losing often overvalued stocks or bubble importance of cutting losses and
money and the fear of missing out markets, ignoring the risks. letting gains grow. Yet many
(FOMO). investors find it challenging to apply
Then there’s the greed to keep
The fear of losing money is money—a lesser-discussed these principles in real-life scenarios
because emotions cloud judgment.
universal—everyone dreads seeing but equally impactful force. It
their hard-earned cash vanish due often causes
to a poor investment. This essential investors to sell
emotion can encourage caution, winning stocks
but excessive fear often leads to prematurely
hesitation and missed opportunities. or hold onto
losing ones too
On the other hand, FOMO is a long in hopes
less obvious but equally potent of recovery.
emotion. It manifests as the anxiety This behavior
of underperforming compared to undermines long-
others or missing out on profitable term returns,
trends. For example, during the tech defying the well-
boom of 2000 or the housing bubble known advice:
of 2008, many investors ignored

60 Lubbock Senior Link