Emotions influence almost every aspect of financial decision making. Whether the decision is made impulsively or not they still have some influence and sometimes it can lead in a wrong direction. Novice and even the seasoned investors also can be affected by triggered behaviors. But the private investors it can be said that they most certainly act on emotional triggers because of their portfolio’s nature and the level of the responsibility over its success.
The most worst and the often made mistake is checking on the investment portfolio either out of fear or boredom or even worse, greed! But as the saying goes “You haven’t lost or gained any money until you’ve sold.” In order to avoid the emotionally triggered investment dangers there are few tips and guidelines suggested by Ben Hobson, Markets Editor of Stockopedia.
The more volatile portfolios are at more risk as the luck may run out any time. The more relaxed or the experienced investors may fall prey to the temptation of “riding the bull’ for a prolonged period in order to maximize their share of profit not knowing that there can be a decline around the corner always. Other trait to avoid is investor arrogance as it comes as a result with the power over estimating a share and waiting for a long period to act on it. And it goes same with under estimating a value of a share, the investment case can change anytime. The key is to strike a balance between the two. The greed when takes over you need to understand it and make sure to take sensible decisions that are well grounded. Bearing in mind that there can be devastating societal changes and black swan events like the pandemic crisis. They can alter the landscape completely shifting the past strength of a stock anytime.
The urge to react are high when doing private investments it is a time consuming activity and it is your own money which is at stake. Being emotionally attached to your stock can cost you the opportunity of reaping its rewards by holding on for an uptick in value as the emotions will be wrapped up in market shifts. Avoiding the attachment might help in having a better analogy of incline and decline of shares. In order to avoid being consumed by the market shifts make sure to build a strategic investment plan and refine the investment and applying those strategies constantly across the portfolio.
In order to boost your chances of seeing higher returns diversifying the private investment portfolio across different sectors will help. It also reduces the chances of risk. To facilitate the drive and confidence to begin dealing with more volatile shares can be achieved by having investments in different sectors. It also provides you with peace of mind for cautious investing. Emotional triggers happen when all the investment is either at stake or lost. Diversifying the portfolio is about creating the safety net when this happens, when one or more investments go away. Having an investment strategy means having a source to look for when investing or searching for the next stock or have it recommended to you. You can always look into it and make sure if the investment fits your strategy.
The conscious ability to rationalize and reason, as humans is the reason which allows us to calculate risk and make an informed decision and reward. But sometimes our instincts take over our mind and steer the wheel leading to impulsive and emotional decisions. So before making a decision regarding the portfolio, it’s always advisable to take time and stop to interrogate the facts and avoid expensive losses later.