Financial Advice: Hope is NOT an Investment Thesis

Emotion is a necessary evil in every decision-making process that we as humans face. HOPE is the cross-section between rational thinking and irrational emotion. It can be human’s greatest asset but also what anchors us down. 

When making any decision in life anytime hope enters the equation it is time to pause and take a step back, this doesn’t mean you are wrong to hope but rather it is time to maybe think twice about the situation. In investing this happens all the time. Here are two common thoughts when investing:

“I hope this investment turns around, so I can make back my money.”

“I hope this investment keeps going up, so I make more money.”

If you have said something similar to this then you are no different than anyone else, you are human. When you come to one of these scenarios, what is happening is there is a disconnect between your brain (rational) and your heart(irrational) sides. Your rational side is telling you there is something wrong or something isn’t quite right, and your irrational side wants the desired outcome. In many situations, we default to the latter for our desired outcome. 

When this problem does come up, all this is saying is that you should take a step back and rethink the situation. What makes the most sense to do going forward? Is there any reason to change my thinking? If I were given the option to enter this investment today, would I? What can be done to mitigate the current risk? 

Investing is very similar to real life and hope has a place and might be one of our most powerful weapons when times are tough to keep us pushing on or to keep reaching for more when we meet a goal. But when hope enters the equation the brain and heart all saying two different things, so it’s time to reassess what makes the most sense for you.

Sincerely,

Justin, Konrad, Merriel

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^{Disclaimer: This newsletter is solely the work of Justin Lim and Konrad Kopacz for the private information of their clients. Although the author is a registered Investment Advisor with Echelon Wealth Partners Inc. (“Echelon”) this is not an official publication of Echelon, and the author is not an Echelon research analyst. The views (including any recommendations) expressed in this newsletter are those of the author alone, and they have not been approved by, and are not necessarily those of, Echelon.}

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 ^{These estimates and expectations will prove to have been correct, and actual outcomes and results may differ materially from what is expressed, implied or projected in such forward-looking statements.}

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