Don’t Listen to Your Emotions When Investing

Your emotions guide you to almost the exact wrong decision when investing. Don’t listen to them!

💈💈💈

Interestingly, a colleague of mine who’s done very well when he gets ultra emotional, like when he feels every part of his body says he should be selling, he buys.

Good.

And so he is been able to harness the power of his emotions by going against them. And he’s done very, very well. The premier example was in March of 2009 when he said he literally wanted to hit the sell button on his entire portfolio. And because it was so strong an urge. He put the cash he had into the market, and of course the markets went on a roaring rip. And I think, so you can harness it that way. I don’t recommend timing the market and trading to most people. But the point is, your emotions guide you to almost the exact wrong thing over and over again. What I’ve seen, and I’ve talked about at length with my father, is the people who are best at this don’t manage their emotions. They don’t let their emotions get involved because they’re not paying that much attention.

So most of the best investors I know have kind of set it and forget it. And yeah, they’ll look at it every so often just to make sure things are moving along and for comfort reasons, but they’re not looking at it on a daily basis, even monthly, they’re looking at it on an annual basis. And that seems to be a good formula for success.

But when it comes to finances, you actually have to do everything, opposite to your instinct and you have to recognize, Ooh, why am I feeling really anxious or really, you know, intense emotions? This fight or flight emotion, how do I deal with that? And you’ve got to recognize that maybe you’ve got to think about where, where is that stemming from? Got to remember the age old advice is like, do nothing, just stand there and then do the opposite. Or, you know, sometimes that is too difficult. Cause that, that is like, wow, you’ve got your, your emotions on lock when you’re able to buy more instead of sell. Even just, okay, just don’t touch it. Don’t touch it. Don’t sell. Don’t buy. Just don’t touch it until you can get back into that place of emotional regulation and then more logically and long term again.