Emotional investing happens when we allow our hearts to rule our heads when it comes to managing our money and it’s rarely a good thing. Reacting to a sudden change in the markets, feeling stressed about your portfolio’s performance, or taking a risk because of a feeling can all derail the best-laid investment plans.
Investing can be an exciting and worthwhile part of your wealth management plan but it needs to be carefully managed to ensure the best possible results. In today’s post, we’re going to look at a few ways to stop emotional investing in its tracks so that a more effective style of investment can take place.
Ways to curb emotional investing
1. Focus long-term
Being reactive to market changes hardly ever pays off. When it comes to investment, you need to see and understand the bigger picture of your financial goals and be committed to a long-term strategy. This doesn’t mean that the strategy doesn’t change but that it doesn’t just keep changing every time things don’t go your way in the markets and nerves arise. Impulsive decisions tend to hinder portfolio growth. Things aren’t going as planned? Stop, take the long-term view, and adjust as and when required.
2. Diversify, diversity, diversify
A diversified portfolio is a more secure portfolio. Instead of chasing short-term wins and exposing your portfolio to unnecessary risks, invest across a range of options and protect your wealth from the pitfalls of a single focus portfolio. That way, if something were to happen in one sector, the stability of your other investments gives you the time and security to make decisions based on knowledge and expertise rather than snap reactions. Read more about the benefits of diversification here.
3. Get educated
Investing should not be undertaken as a game of chance. If you are interested in growing your wealth through investment (and you should be) then you need to educate yourself about the investment process. Take a class, read expert material, speak to a financial adviser and learn as much as you can about wealth and portfolio management. Not only will this allay your financial fears (fears that can drive you to make rash and impulsive investment decisions) but it will help you to be a more successful investor in the long run.
4. Get expert help
Investing solo can be a difficult and demanding process. Do your research and then find a trusted and reputable financial adviser to guide you on your investment journey. An independent adviser with experience and expertise can bring a level of calm and control to your investment decisions as well as help you to make informed moves that are not weighed down by emotional considerations. It also never hurts to have a second opinion or unbiased view to help you stay on track.
Don’t allow powerful emotional responses to damage your opportunity to thrive financially. Curb emotional investing by getting expert help and investing the right way. At TRG, we offer a wide range of financial services, from insurance to investment management, designed to help you build a stable and prosperous portfolio with your security and wealth in mind.
Let us offer you expert financial guidance.