Xerxes Nabong, CFP®, CDFA®
Philip M. Maliniak, CRPC®
Nicole Brown-Griffin, CFP®, CDFA®, EA
Aaron Petty, Client Associate
Hampton Roads: (757) 394-3486
Greater Phoenix: (480) 687-9339
Orange County: (949) 660-8869
The Psychology of Money – How Emotions Influence Your Wealth
As much as we like to believe we make purely rational financial decisions, the truth is—emotions often drive more of our money moves than we realize. Behavioral finance is the study of how human behavior influences investing and financial choices, and understanding it can help you stay on course toward long-term success.
Here’s a closer look at the emotional forces at play—and how to manage them:
1. Recency Bias: "What Just Happened Will Keep Happening"
When markets are up, we feel invincible. When they drop, we want out—fast. Recency bias causes us to weigh recent events more heavily than long-term patterns. A strong year in the market? You might expect the next one to be the same. A sudden dip? You may want to move everything to cash.
Strategy: Use historical data and a longterm plan to keep perspective. Markets are unpredictable in the short term but resilient over time.
2. Loss Aversion: Why Losing Feels Worse Than Winning Feels Good
Studies show that the pain of losing money is psychologically twice as powerful as the joy of gaining it. That means investors are often more focused on avoiding losses than capturing growth —even when that fear hurts long-term returns.
Strategy: Understand your risk tolerance and lean into strategies like diversification and downside protection to stay invested with confidence.
3. Herd Mentality: "Everyone’s Doing It, So I Should Too"
FOMO—fear of missing out—isn’t just a social media buzzword. In investing, it often shows up when we see others jumping into hot stocks, flipping real estate, or chasing the latest trend. The problem? Following the crowd usually means getting in late—buying high and selling low.
When markets dip, recency bias can trigger emotional decisions—like abandoning your strategy and moving to cash. But timing the market is incredibly difficult; you have to be right twice:
- When to get out
- And when to get back in
Even seasoned professionals struggle with that.
Strategy: Resist reactive moves driven by headlines or hype. Stick to a plan that’s tailored to your personal goals, not market noise.
4. Create a “Pause Plan” for Financial Decisions
When emotions rise, logic dips. That’s why having a personal pause plan is so helpful.
Here’s what that might look like:
- Wait 48 hours before making any major financial moves after receiving big news.
- Revisit your goals and timeline before reacting to volatility.
- Talk things through—with a spouse, business partner, or your advisor.
Strategy: Write down your reasoning for any big decision. If it still feels right a few days later, revisit it with clarity—not urgency.
5. Your Advantage: Having an Advisor Who Understands More Than Markets
Markets move. Headlines shift. Emotions rise. One of the most important advantages you have is working with someone who not only understands the financial landscape—but understands you.
Our role isn’t just to select investments. It’s to help you stay grounded when the noise gets loud, offer perspective when emotions run high, and keep you anchored to the plan we built with purpose.
Strategy: Don’t react to markets— respond with clarity, consistency, and confidence. That’s what we’re here to do, together.
Let’s Talk
If recent headlines or market swings have left you feeling uncertain—or if you simply want a second opinion to talk through your thoughts—we’re here for you. Let’s connect and take a fresh look at your portfolio, stress test your plan, and make sure your financial strategy remains anchored in clarity, not emotion.
Here’s to approaching wealth with confidence—and mastering the mental side of money.
Your Team at Wealth Avenue,
P.S. At Wealth Avenue, we are committed to working with individuals and families who are thoughtful about their wealth and seek expert guidance to make informed financial decisions. In 2025, we have the capacity to welcome 24 new client relationships—and we prioritize those who value personalized, high-caliber financial planning.
If you know someone navigating a financial transition or seeking clarity on how these 2025 updates impact their wealth, we’d greatly appreciate an introduction. Whether it’s a close friend, family member, or colleague, we’re happy to share this resource and have a conversation to see how we can add value. With offices in Virginia, Arizona, and California, and the convenience of virtual meetings, we’re here to help— wherever they are!
To those of you who have introduced us to your family, friends, and colleagues—thank you. We’re truly honored by your trust and grateful for the confidence you place in us.
Last month, we featured a Forbes article highlighting Time Out’s ranking of the 50 Best Cities in the World. One of our clients wrote in to share that he’s visited an impressive 41 out of 50—and made a strong case for adding Stockholm, Helsinki, and Taipei to the list. We love hearing your travel stories and global perspectives—keep them coming!
One last read below… If you’re looking for a real-world example of how to stay steady when markets shake, look no further than Warren Buffett. His timeless approach reminds us that the most successful investors are often the most emotionally disciplined. By staying calm, focusing on fundamentals, and viewing market declines as long-term opportunities—not threats—we can avoid reactive mistakes and build lasting wealth.
