More Lithuanians are choosing to invest their own money: according to the State Data Agency, more than half – 53% of Lithuanians are currently investing. But to invest successfully, you need to be resilient, emotionally intelligent and aware of the psychological factors that can lead to negative outcomes. Deividas Urbanovičius, Head of Investor Relations at crowdfunding platform InRento, explains which emotional aspects are the most common obstacles to making investment decisions.
Although one in two Lithuanians invest today, starting to invest just because others are already doing so is not the right reason. As D. Urbanovičius points out, the willingness and determination to invest must come from within, because only then will positive results be achieved.
"If your friends or family members are investing, that's great, but you really need to feel like investing before you start," says the expert. – If you don't want to invest and feel pressured by those around you, you may end up panicking and making irrational decisions that may not lead to the most pleasant investment outcomes. Without understanding how investments work, it is easy to be influenced by populist headlines or inadequate scares."
Fear is often a barrier for starting to invest
Investing is not just about looking at charts or analysing various indicators – it is a complex and continuous process in which human psychological factors play a very important role, D. Urbanovičius notes. According to him, one of the strongest factors influencing the decisions of beginner investors is fear.
"We are most afraid of the unknown. That's why it's important to be interested in investment opportunities and processes, and to find trustworthy people who can help you take the first steps," says InRento's representative.
Fear of losing the invested money can also be a factor when starting to invest and there is nothing wrong with that, he says.
"We never want to lose something we work hard for. This also applies to personal finances. This fear can be eliminated by taking the time and effort to understand how an investment product works, what the risks and opportunities are, and what the regulatory and tax aspects are," says Urbanovičius. On the other hand, high returns can also undermine the perception of investment.
"One of the most surprising aspects of investing is the high and fast returns. If unexpected success comes, the money earned in this way can completely upset the principles of systematic investing, making the process more like gambling than investing," the expert points out.
Getting rich fast and counting unearned money
Just like in life, in investing many people often want to find the quickest and easiest route to their goals. Unfortunately, in the search for a path to get rich quick, people are more easily persuaded by various manipulations, without looking into the product, the risks surrounding it and other fundamental aspects of investing.
"The chances of getting rich quick and without any risk are the same as successfully pulling the Titanic up from the bottom of the ocean," says Urbanovičius, "You should always remember that the most important thing when investing is to have a personal investment strategy, to be disciplined and to be patient.
Another key tip for investors is to never count money you haven't earned. "We often hear people say, "You should have invested in real estate – look at the prices now..." or "If you had invested in bitcoin in 2009, you'd be a millionaire now...". But this kind of remark has no value. They are just unnecessary emotion-raising phrases that get in the way of investment discipline," says InRento's Head of Investor Relations.
How to develop emotional resilience?
According to the expert, investors need to develop resilience to market changes.
"Markets are constantly fluctuating. Therefore, if you are an inexperienced investor, it can be difficult to stay calm in the face of rapidly changing prices. This is crucial for successful investing," he notes.
The key to avoiding fear, becoming resilient and countering the negative psychological factors of investing is to develop financial literacy. As Urbanovičius points out, this can be done in small steps by taking an interest in economics, market trends, listening to podcasts or reading books in your spare time.
"I encourage you to take an interest in the economic processes taking place around you, and I recommend a detailed analysis of the investment product, answering the following key questions: how do investors earn, how much does the service provider earn, and is the activity licensed by the financial institutions' supervisory institutions?", says D. Urbanovičius.
D. According to Urbanovičius, greater financial literacy, critical thinking and structuring of information will help investors better control psychological factors such as the fear that sometimes surrounds them. Equally important, he says, is the development of patience and discipline.
"Investment decisions should always be made responsibly and not be influenced by emotions and misleading information", he concludes.
