Imagine you’ve ended a relationship and a friend asks what you’re looking for in your next partner.
You: Well, I’d like someone who’s exciting and sociable.
Friend: I know what you mean — your ex was not exactly the life and soul of the party, was he?
You: Also, I’d like someone who’s steady and reliable.
Friend: Totally get that — your ex could never hold down a job for more than a year!
It can be similar with investing. For example, if you owned a company that was all about growth but never delivered, maybe now you want one that pays a healthy dividend. Or if you owned a company that went through a major financial scandal, maybe now you want one that’s very conservatively managed. Sometimes investors want the opposite of what they’ve recently experienced.
While this is a normal reaction, the risk is not just changing an investment but also changing your style of investing. While it’s fine to mix up your investments from time to time, it might be less desirable to change your investment style without careful consideration.