There’s a lot of ways you can be led astray when it comes to investing, but one of your biggest battles will come from within. More specifically, I’m talking about those pesky things we call emotions.
That’s right, it’s not all about the high salaries, hot stocks and moonshot double-digit returns!
Mastering, or at least gaining some level of control and insight over your emotions is critical when it comes to investing because at the end of the day, the market couldn’t care less about how you feel.
So, let’s explore three ways that your emotions can impact your investing, and what to do about it (I won’t leave you hanging, I promise)!
Reason 1: You have emotionally invested yourself in a company
I see this happen all the time. You have spent so much time researching and looking into a company that when you finally pull the trigger and invest your hard-earned dollars, you feel an emotional connection to the company (and, more specifically, the share price). When someone comes for your company you feel personally attacked and stop listening to reason.
When you’re no longer prepared to consider the alternate investment case for the company and have civilised discussions, it’s time to emotionally detach yourself.
This can be hard even for the seasoned investor, but it’s important to take a step back from the situation and remind yourself that this level of emotional investment stops you from seeing the full picture.
You’re a much better investor when you can look at differing viewpoints and evaluate each of them, rather than letting your emotions blind you.
Reason 2: You can’t stop checking your brokerage account
If you’re finding yourself checking your brokerage account ten times a day, then you’re likely focusing on the short-term movements of the share price over the long-term growth of the company.
Action Tip: If you can’t stop checking your brokerage account, it’s time to remove the app from your phone! Instead, allocate yourself a set time each week or month to log in via your desktop.
Reason 3: You’re glued to financial media
Are you trawling Twitter, Reddit and the AFR to find any mention of your company or obsessively looking for news to confirm your belief that the market is about to crash?
“Humans are wired to act; markets tend to reward inaction.”
-Daniel Crosby
If this is the case, it’s time to get some distance. When it comes to investing, consuming bucket loads of information centred more around the share price than the company itself, will not do you any favours.
So next time you feel like your emotions are overtaking reason when it comes to your investment portfolio, stop, breathe and remember your goals.
Further resources on behavioural investing
- The Emotions of Investing and More: The Experts Weigh In
- How Emotions Can Wreak Havoc on Your Investment Decisions
- The Importance of Staying Positive: The Impact of Emotions on Attitude to Risk
- Emotions and Financial Decision Making
- Understanding Behavioral Aspects of Financial Planning and Investing
