4 Tips to Help You Keep Your Emotions Out of Investments
Making good financial decisions requires more than just good information, you need a clear head, some discipline and a little distance.
Money is always an emotional subject, but often when our emotions get involved with our investments we will make wrong decisions. And that can be a costly mistake. Keeping emotions and investing separate seems almost impossible for many investors. When reacting too quickly and letting emotions cloud judgment, even the most professional and experienced investors do not make the best decisions. However, keeping emotions away from investment decisions can give you a better chance for success.
Here are four tips on how to keep emotions and investing separate:
1. Set financial goals. Setting financial goals is the first step to investing, and financial goals can keep emotions out of the picture if done correctly. Having a plan will help you keep an eye on the big picture. For example, if you are saving for retirement in 20 years, you know that you have more time to make up for any losses than if you plan to retire in 10 years. These goals can also keep you focused on what you need to do today to get there.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
2. Fight the urge to check performance too often. You might be someone who has the urge to check up on your investments every day, possibly for hours. In doing so, you will see more of the market gyrations than if you check monthly or quarterly. Checking so constantly will not benefit your portfolio in any way, but it may just cause more anxiety. This is even more important if you own individual stocks or mutual funds in any kind of personal account or retirement account. Checking these holdings too often can cause you to panic, and you might make a snap judgment trade. Instead, keep your checks to monthly or quarterly, and concentrate on sticking to your overall plan.
3. Know the objectives and risks in what you buy. Knowing what you are buying is crucial to help you avoid emotional setbacks in investing. Always do your own research before purchasing anything, even if you have outside assistance. Understand what the investment is, how it will help you achieve your goal, what the risks are, and when and how to exit. Without your own research, you will not take full responsibility for your trades, introducing negative emotions.
4. Assign a professional buffer zone. You can create some distance between yourself and your investments by putting a financial professional in the middle of the two. Entrusting a neutral third party who can help you examine your situation dispassionately and encourage you to stay on track, you can hold yourself more accountable for the things that you can actually control.
Did you know? From the small purchase decisions to the large financial plans, it often helps to write things down. Then, you can examine how you come to decisions — which should lead you to make better ones.
To continue reading this article
please register for free
This is different from signing in to your print subscription
Why am I seeing this? Find out more here
Justin J. Kumar embraces a proactive, systematic investment management approach with a customized, proprietary system to help guide his clients toward their financial goals.
-
Stock Market Today: Nasdaq Soars Ahead of Tesla Earnings
The EV stock rose nearly 2% ahead of its highly anticipated Q1 earnings report, due after tonight's close.
By Karee Venema Published
-
GM Stock Accelerates After Earnings Beat
General Motors beat expectations for the first quarter and raised its outlook for the year. Here's what you need to know.
By Joey Solitro Published
-
Four Tips to Make Your Sales Presentation a Winner
Being prepared and not being boring can go a long way toward persuading a potential customer to buy into what you’re offering.
By H. Dennis Beaver, Esq. Published
-
Pros and Cons of Waiting Until 70 to Claim Social Security
Waiting until 70 to file for Social Security benefits comes with a higher check, but there could be financial consequences to consider for you and your family.
By Patrick M. Simasko, J.D. Published
-
Now Could Be Time for Private Investors to Make Their Mark
The venture capital crunch may be easing, but it isn't over yet. That means there could be direct investment opportunities for private deal investors.
By Thomas Ruggie, ChFC®, CFP® Published
-
How to Stop Boredom From Ruining Your Happy Retirement
Retirees who explore new interests and have an active social life are more likely to find joy — and even greatness — in the newfound freedom of retirement.
By Richard P. Himmer, PhD Published
-
The Life-or-Death Answers We Owe Our Loved Ones
How our life ends isn’t always up to us, but that question too often must be answered by loved ones and health care workers who don’t know what we would want.
By Joel Theisen, RN Published
-
Hot Tips for Home Buyers and Sellers Right Now
Real estate looks to be especially hopping this spring, thanks to pent-up demand and buyers adjusting to higher mortgage rates. Here’s how you can prepare.
By Pam Krueger Published
-
Is 100 the New 70?
Eating well, exercising, getting plenty of sleep and managing chronic stress can help make you a SuperAger. Funding that long life requires longevity literacy.
By Phil Wright, Certified Fund Specialist Published
-
Nine Lessons to Be Learned From the Hilton Family Trust Contest
Disclaimers, good communication, post-marital agreements and more could help avoid conflict in a family after the owners of a wealthy estate pass away.
By John M. Goralka Published