Many investors underestimate the importance of having a plan in place to combat emotion-based investment decisions. Often, behavioral biases lead investors to make emotional decisions that derail a rational long-term investment plan. Consider how quickly and easily investors can decide to deviate from a long-term investment plan when faced with negative short-term returns. Yet sticking to a rational process can help boost long-term returns.
How do we make investing less stressful? A solution is to make a plan—An Investor Stress Management Plan or "ISMAP." The ISMAP is designed to prepare investors for inevitable scary moments and provide techniques to reduce stress to a manageable level. It contains actions that can help take advantage of market turmoil to actually improve long-term performance potential.