Article

Tips to Keep Emotions and Investing Separate

Investing Emotions

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. Reducing your emotions can give you a better chance for investing success.  Here’s four tips on how to keep emotions and investing separate.

May 4, 2021
Investing Emotions
Important Disclosure: Content on our website and in our newsletters is for informational purposes only. The information provided may (or may not) directly apply to your situation. We recommend that readers work directly with a professional advisor when making decisions in the context of their specific situation.

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 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:

Tip #1: Set Financial Goals

It sounds so simple, but setting financial goals really is the first step to investing, and financial goals can keep emotions out of the picture if done correctly. Having goals will help you keep an eye on the big picture.

For example, if you are saving for retirement in 30 years, you know that you have more time to make up for any losses than if you plan to retire in 5 years. These goals can also keep you focused on what you need to do today to get there.

Tip #2: Stop Checking on Your Performance Every Day

Do you check up on your investments every day, sometimes spending hours figuring out how you’re doing and what you could have done better if you had just moved your investments around? If so, you are just going to drive yourself crazy because all you’ll really see will be market gyrations and mistakes you think you could have avoided.

Checking too often will not benefit your portfolio in any way, but it will cause anxiety. This is even more true if you own individual stocks as checking stock prices too often can cause you to panic, and you might make a snap judgment to trade. Instead, keep your checks to monthly or quarterly, and concentrate on sticking to your overall plan and goals.

Tip #3: Know the Risks in What You Buy

Again, it sounds so simple, but 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 goals, 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.

Tip #4: Create a Professional Buffer

You can create some distance between yourself and your investments by putting a financial advisor in the middle of the two.

By entrusting a neutral third party who can help you examine your situation objectively and encourage you to stay on track, you can hold yourself more accountable for the things that you can actually control.

Other content you may like

  • Advanced Philanthropy: Private Foundations

    Advanced Philanthropy: Private Foundations

    October 13, 2021
    For many affluent individuals, occasional gifts to a favorite charity may satisfy their charitable inclinations, often with the added incentive of a substantial tax deduction, along with various estate planning benefits. There is also a far more serious side to philanthropy that is ideal for managing a large, continuous charitable giving program. How much do you know about private foundations?
    Read this Article
  • What's Driving the Market

    Podcast Highlight - What's Driving the Market

    June 14, 2023
    The Team takes a look at the big driver in the S&P 500, along with the AI revolution and how similar breakthrough innovation has performed in the past. They point out the big flip flop from last year and how that is affected by diversification.
    Read this Article
  • Life Insurance Planning

    A Quick Look at Life Insurance Needs

    July 7, 2021
    Have you ever wondered how much life insurance is enough? How can you design a plan for you and your family’s future financial needs? This article introduces a simple way to relate life insurance needs to your personal financial goals.
    Read this Article
  • Planning for Your Financial Future

    Planning for Your Financial Future

    April 5, 2023
    Money plays an important role at every turn your life takes. There are ways to develop good financial habits now so you can be prepared for the different strategies that certain events require in the future. And the good part is, you can start from wherever you are currently, to make decisions that will go a long way towards achieving your financial goals.
    Read this Article
  • The link you have selected is located on another server. The linked site contains information that has been created, published, maintained, or otherwise posted by institutions or organizations independent of this organization. We do not endorse, approve, certify, or control any linked websites, their sponsors, or any of their policies, activities, products, or services. We do not assume responsibility for the accuracy, completeness, or timeliness of the information contained therein. Visitors to any linked websites should not use or rely on the information contained therein until they have consulted with an independent financial professional. Please click “Continue to Link” to leave this website and proceed to the selected site.
    phone-handset