Emotional Investing

Although it is easier said than done, emotions do not have a place in your investment journey. A significant portion of portfolio losses are due to emotional decisions made by investor and investment manager alike, leading to irresponsible or otherwise ill-informed decisions.

Most people buy into investments because they are hyped on media platforms. Likewise, they will also then sell because of widespread panic or disfavor from the media or from friends and family. The truth is, with today’s financial markets, information is rapidly incorporated into the price of assets, so if you are akin to emotional investing, you are bound to buy when everybody else is (hence at price peaks) and sell with everyone else (hence at price troughs/lows). By doing this you are obstinately defeating the law of buying low and selling high and you will seldom make a profit investing.

The points at which we are likely to make the best investment buys take the toughest toll on emotions because they are usually trying times for the market, when prices are at their lowest. Disposing of assets at their price peaks is equally difficult as it requires letting go of something that is doing exceptionally well. Undoubtedly, it seems dumbfounded to dispose of an asset that is its prime, perhaps even irresponsible, but this is what a good investor does.

Emotional investing goes beyond the buy-low/sell-high principle and its complexities.

Read further on how to manage emotions when investing, on our website.