Don’t Panic! Tips for Keeping Emotions out of Finance

The emotions about Money = security.

It’s why we work. It’s why we save. And it’s certainly why we invest. 

But when our financial security is on the line, it can be difficult to keep emotions out of the equation. We’re talking about our livelihoods!

The problem is, combining emotions with investments is a recipe for poor decisions. In the realm of investments, poor decisions can lead to costly mistakes, even for the most serious investors.

When we get worried or stressed, emotions can run high. And when that happens, reactive behaviors that were intended to protect us end up having the opposite effect — they cloud our judgment. Then we make financial knee-jerk reactions from a heightened emotional state rather than a place of rational thinking and good judgment.

 

How to keep emotions and investing separate

Here are 4 tips for keeping a cool head and your emotions in check when it comes to your investments. 

 

Tip #1: Big Picture Thinking

Setting financial goals is really the first step to successful investing, so if you haven’t strategized with a financial planner, start here. But having goals has the added benefit of helping you look at the big picture of your financial and investment strategy, focusing on long-term trends rather than being whipped around by market spikes and drops. 

Case-in-point, if you have the long-term goal to retire in 30 years, you won’t be as fazed by momentary losses, secure in the knowledge that you have plenty more time to recover than someone who plans to retire in 5 years. This can help you keep perspective and stay focused, but also can help you ascertain how comfortable you should be with exposure to risk. 

 

Tip #2: Put your Phone Away!

Of course you’re curious. You want to know how your portfolio is faring, what the market is doing, what you could do better. It’s natural. But if you find yourself in the daily habit of checking up on how you’re doing and berating yourself for what you could have done better “if only,” you’ll drive yourself into an emotional frenzy. Watching market gyrations and castigating yourself for the mistakes that hindsight illuminates is fodder for feeling out of control. 

And that will lead to rash decision-making. . 

“Set it and forget it!” You remember the old infomercial line. Well, apply that same strategy to your investment checks. Try setting a monthly or quarterly reminder in your phone to check — and then forget it. You’ll benefit more from concentrating on sticking to your overall plan and goals. 

 

 

Tip #3: Risky Business – Know Yourself, and Your Investments

Knowledge of your own risk-tolerance is key, but the other side of it is knowing what investments you’re buying. It should go without saying, but it needs to be said. Always conduct your own research before buying anything to ensure that both your own and the potential investment’s risk levels are compatible. Even if you have outside assistance. 

Understand what the investment is, how it will contribute to your long term financial goals, what the risks are, and how to exit if necessary. Doing this seriously helps you mitigate the chances that your own lack of knowledge – of yourself and your investments – will lead to an upsetting financial situation. 

 

Tip #4: Get Some Help

You don’t have to do it all, and you certainly don’t have to do it alone. There are very smart people out there who dedicate their entire professional lives to helping people plan and invest intelligently. 

Hiring the services of a portfolio manager puts a nice buffer between your emotions and your investments. Having a knowledgeable, neutral third-party can help you be more objective in your decisions, keep you on track, and hold you accountable for the things you can actually control. 

 

If you’re ready to start doing some data-driven investing where cooler heads prevail, reach out to us at info@nestfinancial.net. NEST Financial is an Austin-based, bespoke wealth management company. We are passionate about helping Austin families, business owners, and individuals achieve their BIG PICTURE, financial goals. Let Gloria and Sean assist you in creating a comprehensive financial plan to get you on the path toward your financial security.

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DISCLAIMER: We are legally obligated to remind you that the information and opinions shared in this article are for educational purposes only and are not financial planning or investment advice. For guidance about your unique goals, drop us a line at info@nestfinancial.net.