A hindrance to successful investment outcomes is letting the daily movements of the stocks you own and the market determine your emotions. Personal emotions are arguably the single biggest determinant of your investment performance.
Making investment decisions when your emotions are at extreme highs or lows generally does not lend itself to a good outcome.
Do you feel good when your shares or Self Managed Super Fund goes up?
Do you feel depressed when the value of your portfolio goes down?
If so, how can you control those emotions?
In short, just keep it real.
Try to use a pragmatic approach that treats the situation from a sensible and realistic point-of-view rather than listening to extreme predictions. As we know, the media is excellent at accentuating both the positive and the negative. When share prices are falling, the media portray doom and gloom that can drive emotionally charged decisions. Shutting out media ‘noise’ and keeping your emotions in check will help you stay level and grow your portfolio in the long run.
A good way to keep your emotions level is to have a plan in place for your investment future. As a good investor, your job is to assess the situation and act when you see fit. Making buying and selling decisions with a logical and rational approach will serve you well over time.
Some planning considerations might include:
- Determining which businesses you want to own shares in and why?
- What price you would like to pay for those shares?
- What price you think is a fair price to sell the shares at?
Having the discipline to act on your plan when the time is right will contribute to successful outcomes.
Finally, keep it real by objectively monitoring your progress and your plan to continually make logical decisions. Be prepared to make the odd mistake and importantly, be prepared to change your plan if the facts change.
This article is published by Dean Mico.
The information provided in this article is intended for general use only. The article is intended to provide educational information only. Please be aware that investing involves the risk of capital loss. The information presented does not take into account the investment objectives, financial situation and advisory needs of any particular person, nor does the information provided constitute investment advice. Under no circumstances should investments be based solely on the information herein.