In previous post we have discussed about how emotion take over our investment and we end up making mistake such as buying high and selling low which cause losses.
Successful investor may be able to cope up with this loss but you may not, which may cause strong disappointment and fear while doing investments.
So million dollar question is:-
- What it takes to become successful investor?
- How to win over emotion?
Let’s check out what you need to do to stay away from emotions while doing investments.
1. Do Your Independent Research Before Investment
Knowing what you are buying is key to avoiding emotional set backs. Always do independent research before doing any investment, even if you are taking advice from financial advisor
Always understand about your investment and how it will help you to achieve your goals and what risk is involved in that.
Without your own research you may not take full responsibility of your investment and end up involving negative emotions, which inspires you for making mistakes.
2. Set Financial Goals
Setting financial goals is the first step to investing. Write down your long-term financial goals and how much volatility you can tolerate comfortably.
Stick to your financial goals, don’t allow short- term ups and downs in market to rash your investment decisions. Read your financial goals every time when emotions try to take over your mind.
Diversification can help to control your emotion because it offers some downward protection. Diversification means having different asset class in investment portfolio. It includes investment class such as real estate, commodity to hedge against market uncertainly.
A diversified portfolio can held up relatively well in most market conditions.
4. Stop Checking Your Investment Portfolio Constantly
Reviewing investment monthly or quarterly is good idea but some of the investor has habit of checking investment portfolio everyday or every hour. If you are doing same stop doing that. It will not benefit your portfolio in anyway, it will just cause more anxiety. Checking your investment too often can cause you to panic/fear and you can make a snap reaction trade. Just stick to your plan and ignore everyday market movements.
Money is always an emotional subject, but often when our emotions get involved with our investments we will make wrong decisions which will end up costing us too much. Keeping emotions out of investing may seem difficult but if you follow the tips above you should be able to accomplish it.
Still if you feel that you can’t put your emotions aside to make an informed, objective decision, consider talking to a financial advisor or someone else you trust most. This doesn’t mean letting someone else manage your investments for you, although some people choose to do that. It just means that having someone to guide you someone who is not personally affected by how much money you make or lose.