Despite the recent financial scares and various governments responding to prop up the financial system an investment psychology expert is urging consumers not to panic.
Griffith Business School Adjunct Professor and Lecturer Dr Malcolm Johnson, who is also partner in a southeast Queensland financial planning practice, said the worst thing consumers could do at the moment was panic.
“People who invested beyond their personal tolerance to risk are going to be more disturbed with prevailing news,” Dr Johnson said.
“These people in particular will be experiencing state of despondency and feeling remorse, as if the sky is falling in.”
Dr Johnson said the current retraction in the market was part of the normal cycle.
“We’ve had three to four years of good growth and now we have a retraction. It’s normal for markets to have cycles, however there are some unusual things happening now because the retraction is being caused by finance industry-based issues, not external issues like war.
“For the last three to four years most people have done quite well out of the growth in the market. It’s the people who have invested beyond their risk tolerance that are concerned.
“Usually in choppy times like these, people panic and that’s the worse thing people can do. People need to look at their longer term objectives and then seek quality advice, based on thorough research to be in a position to make informed decisions.
“It’s this type of environment where wealth transfers from the impatient to the patient. People should act quickly to get quality advice but allow time for consideration before making a decision.”
Dr Johnson is available for comment on the psychology of money.