Emotions are the handicap of the novice investor. They hinder your rational thought process and increase your chance of failure. So it should be obvious that you’ll need to ignore your emotions if you ever want to make a profit while investing. Here are some quick ways you can become as cold as ice and invest emotion-free.
1. No Wishful Thinking
There is no stock genie granting magical wishes. If your stock is performing poorly, you need to get straight to the point and ask yourself why you are still invested in your stock. If your answer is anything other than “I know for certain that the market is valuing it incorrectly”, then you are just doing wishful thinking.
2. Take a Time Out
If you feel like you aren’t certain what you should do with a stock, and that perhaps you are becoming emotional, then you need to take a time out. Step away from your desk, try and go to a quiet place, and remind yourself why you are investing in your stock. If your explanation sounds rational to you, then you know you are invested properly. Use this to boost your confidence anytime you doubt yourself or become emotional.
3. No Playing Favorites
It’s easy to grow fond of a stock that has made you a good profit (or still is making you profits). While it’s okay to be a supporter of the company the stock represents, it’s not okay to blindly put your money into it hoping their past performance will continue. Always remember that you invest in stocks to make money, and nothing more.
4. Don’t Obsess Over Daily Fluctuations
If you are investing and not trading, you need to realize that your stock’s price will fluctuate every day. This is normal, and it shouldn’t change any of your beliefs on where the stock is headed, unless there is a significant change that occurs within the stock.
5. It’s Just Money, Get Over It
This might seem crazy to some, but you should always remember that in the end it’s just money. If you obsess over your profits and losses, you’ll be investing with a clouded mind. Part of being an unemotional investor is accepting the fact that you will sometimes lose money. As long as you pick yourself back up and head right back with a rational thought process, you’ll almost always come out profitable.