For some Canadians, the ups and downs of today’s markets can seem like an emotional roller coaster. When the markets go up, it’s a fantastic feeling but when the markets dip, that feeling turns to dread. In fact, some people say the pain of losing impacts them about two times more than the joy of gaining does.
Did you know there’s a name for this intense fear of losing? Loss aversion is the idea that investors who are so fearful of losses focus more on trying to avoid these losses than on making financial gains. When the market feels risky this fear can intensify and lead some to not invest at all.
Unpredictable markets are here to stay so waiting until you think the market will settle could mean you miss out on longer-term gains. Fear of loss can often make people unsure of when to invest, what portfolios to pick and how long to ride out changes in the market.
By understanding your goals and any fears you may have when it comes to investing, an advisor can help guide you to an investment solution that may have less risk so you can feel confident that you’ll achieve your financial goals and smooth out any market volatility.
Description: This animated video uses a coin traveling along a fluctuating line to illustrate the feeling of market ups and downs. Line graphs of investment growth over time demonstrate how a financial advisor can help you reach your goals.
Narrator: For some Canadians, the ups and downs of today’s markets are an emotional roller coaster.
Description: A wavy line enters frame. A coin rolls along the line like a roller coaster.
Narrator: When their investments rise in value, they feel fantastic.
Description: As the coin moves upward, happy face graphics appear.
Narrator: But when the markets dip and their investments fall in value, they feel awful.
Description: As the coin moves downward, sad faces appear.
Narrator: In fact, some people say the pain of losing impacts them about two times more than the joy of gaining does.*
Description: The camera pans past the line as the sad faces fall into a bar on a graph labelled “Pain of loss.” The happy faces fall into another bar labelled “Joy of gains.” Text “2x” appears beside graph. A citation appears: *Source: https://thedecisionlab.com/biases/loss-aversion
Narrator: This reaction can lead them to play it safe, even if it means giving up potential growth.
Description: The wavy line continues from the bottom of the graph. The camera follows.
Narrator: So they decide not to invest in the markets at all.
Description: Camera zooms out to reveal the line on a graph of investment growth over time. One goal labelled “New home” is shown in the upper right corner of the graph. A dotted line shows projected growth to meet the goal.
Narrator: Or if they do, at the slightest drop, they withdraw their money and hesitate to get back in.
Description: The coin drops into frame and lands on the line. The line stops over halfway through the investment period, showing money has been withdrawn. The coin rolls off the line and falls out of frame.
Narrator: Or they choose low-risk investments which may not provide the return they need to reach their financial goals.
Description: The coin lands onto a new line graph, showing a low risk investment over time. The projected goal of “New home” is missed and the coin falls off the line again.
Narrator: An advisor can help you feel confident in your financial plan
Description: Cut to a young adult in a circle with his phone held to his ear. A second circle appears, revealing an advisor coaching him on the other end of the call.
Narrator: By showing you how avoiding investment risk could put you at risk of not achieving your financial goals.
Description: The advisor’s circle grows smaller and the line graph of the low risk investment returns. The advisor’s hand moves into frame. He runs his finger along the line, smoothing out market fluctuations. Two more goals, “Education” and “Retirement” are added to the graph with a timeframe of 25 years.
Narrator: And get you thinking about the long-term gain, keeping you on track no matter what the markets do.
Description: The advisor’s finger moves the line higher to align with the investment’s projected growth, meeting all three goals.
Narrator: At Canada Life, we offer investment solutions that help protect your savings
Description: Three squares move into frame, labelled “Discover your investment options,” “Create your plan, with our help” and “Bring your goals nearer.”
Narrator: from the market’s roller coaster ups and downs – without sacrificing growth opportunities.
Description: The camera pans returning to the coin rolling along a smooth line. The camera zooms out to reveal the coin on a graph showing an investment over time. The investment is protected from market fluctuation.
Narrator: Talk to an advisor today.
Description: Camera pans up to reveal text: “Talk to an advisor today.”
Narrator: Don’t have an advisor? Visit canadalife.com
Description: Text “Don’t have an advisor? Visit canadalife.com” appears with legal line: Canada Life and design are trademarks of The Canada Life Assurance Company. canadalife.com 1-800-678-8026
Starting a financial plan early is an important step to growing your wealth. Think of investing as a marathon and not a sprint. By building a portfolio with less unpredictability, advisors can help you can feel more comfortableOpens in a new window with your investments no matter how the market is performing.
Consider funds that are designed to help mitigate some risk, regardless of what’s happening in the markets. Canada Life Risk-Managed Portfolios can help make saving for the future less stressful. They strive to reduce volatility and balance that with income and growth potential to help protect your savings when markets are down, while still taking advantage of opportunities for growth when markets are up.
As volatile markets become the norm, an advisor can help you stay on course with your financial goals and take the worry out of investing. Talk to your advisor to learn more.