3 Ways to Keep Emotions in Check When Investing
Written by Judy McKinnon | Published on March 29, 2018
Written by Judy McKinnon | Published on March 29, 2018
Have you ever fallen in love with a stock for all the wrong reasons? Maybe it was a hot, new trend you hadn't fully researched. Or you got caught up in the buzz of what your friends or family were doing. Maybe it worked out; maybe it didn't. We may not like to admit it, but emotions can often get the better of us when making (or not making) portfolio decisions.
"Emotions can hijack your investment decisions," RBC Behavioural Economics expert Michael Sherman said in an interview.
"While we all tend to be emotional about money, we're far better off when we approach long-term investment strategy from a cool and rational perspective," he said. "Letting emotions influence our investing decisions can often lead us astray and can result in decisions we'll regret in the long term," he added.
With stock markets continuing one of their longest bull runs in history, despite some recent whipsaw movements, it's hard to avoid getting caught up in the excitement. There's no shortage of tales of overnight success as certain hot investments skyrocket, which for some makes it seem like a great idea to jump on the bandwagon. Same goes for getting caught in panic mode and maybe selling prematurely when markets turn. Investing can be a roller coaster of emotions.
So, just how do we work to keep emotions out of our investing decisions? Here are three considerations.
In short, doing the research, knowing yourself and how much risk you're comfortable with, and sticking to that plan you came up with can all help keep your emotions from overpowering your logical thoughts.
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