Can Emotional Intelligence Help You Invest?
Charles Wolfe
CEO at Charles J. Wolfe Associates, LLC Results Driven Firm based on an Emotionally Intelligent Approach to Leadership
One day I was sitting in an airport lounge in San Francisco. I was having a drink at a bar and struck up a conversation with the man sitting next to me. Turns out he was a professional who specialized in investing other people's money. At one point in our conversation he told me something I would never forget. He said "The key to my job is to keep my investors from panicking. Everyone wants to buy low and sell high but our emotions often make us feel just the opposite. When everyone is buying we want to rush in and buy too. When everyone seems to be selling we are scared that we will lose all that we have invested. We desperately want out!
"If I can keep my investors from this type of panic I can almost guarantee that they will do better than if they simply respond to their emotions and react."
Having thought about his comments over the years I have found them to ring true. It is very hard to hold on to your investments when most others are selling. And when the market is going way up it is hard not to want to get in on the buying.
When I was younger I felt the sense of panic much more deeply when the markets started falling. I had much less invested but very little to back it up. As I aged and saved I felt I could afford to wait the markets out. I chose good stocks after analysis and waiting and watching stock prices. I tried to pick equities that I was comfortable with and understood. Over the years I have made my share of mistakes but overall have performed very well, in part, because I always remembered what I had learned one night in a lounge that investors need to be able to keep from panicking. When markets plummeted a few years ago I was able to ride it out and the markets have come back. When I was younger I could not afford to ride it out. So you need to be careful, thoughtful, analytic, and emotionally intelligent about investing in the markets as well as investing in relationships with people who manage your money.
So is that all there is too it, simply don't panic or is there more to learn about emotional intelligence and investing. I refer you to an article I read this morning that prompted this post to learn more.