Investing is always a game of knowledge, numbers and timing. One thing, however, that all of the star investors agree on, is that none of these things are as important as an even temperament. When you are investing or even thinking of investing, a close watch needs to kept on emotional decisions. Making an investment decision based on an emotion like fear or excitement could cost you big.
It definitely takes practice to keep one’s emotions in check in the stock market, as they are run by the hard-wiring in our brain. The trick is never to make and act on an impulsive decision. So your stocks are down 30%. Instead of panicking and selling out of fear, you should remain calm and rely on cold, hard and logic investing laws to help you decide what you should do. Stepping out of the emotional state of mind can help you tremendously when it comes to investing.
Even basic rules of the stock market like “buy low, sell high” can get thrown out the window with emotional decisions. So to begin keeping those devastating actions at bay, start thinking about why you are making the decision you are while investing? Are you choosing what to invest in with logic and good investor experience? Or are you just picking up what’s hot because you are excited about it? Asking yourself these questions on a regular basis can help you uncover some thoughts and actions you are making for the wrong reasons.
Once you begin to level your temperament when it comes to investing, you can begin making wiser decisions. Investments can be made over the long haul and give you a much higher return than impulsive sales which give you some luck here and there. Seeing things from an emotional distance can give you the clarity needed to see the big picture – much like standing further back from a building helps you see more of it. If you are not a day trader or in the pit on Wall Street, there is no reason for you to act fast an on impulse. Take it easy!