BellaOnline Forums Money Investing Your Emotions and Investing

Our emotions play a large role in our investing success. Some emotions hinder. Some emotions help. Identifying the good from the harmful is the first step to improving your investment performance.

Your Emotions and Investing

Do you feel your emotions help you to invest better? Or have they caused you to make irrational decisions?

Confidence is great. Just be wary of being overconfident. Yes, it is good to believe in and trust your judgement. However, do not start to think that you are smarter than everyone else. That kind of overconfidence can quickly lead to poor investment decisions.

With me, overconfidence is not a problem. I find financial stuff extremely intimidating. I was never good at math as a kid (or an adult), and though I've had IRAs and 401Ks, I have to force myself not to procrastinate about dealing with them.

I can see how not being good with math would making investing intimidating. Even if you are good at it, the numbers can get frustrating.

For me, I am working on the patience portion. Even though I am a long term investor, I still get impatient if an investment isn't going well. That's when I take a deep breath and remind myself that I am investing for many, many years and not just next week.

Are you afraid to risk your money in the stock market?

The stock market is intimidating. Seems both random and volatile. Is it true that stocks and bonds move in opposite directions and so you can shift your money from one type of investment to the other if one type starts to plunge in value?

Usually stocks and bonds do move in opposite directions, but lately they have both gone up. Bonds tend to be more stable although with such low interest rates they will experience more volatility when the economy returns to normal rates. Personally, I like to keep a mix of stocks and bonds to balance each other out. I find it hard to jump out of stocks into bonds and then back into stocks. I have trouble judging when the right timing is. I think that is why many financial advisors recommend keeping a mix and riding out the bad times. Of course, that can be tough to do emotionally.

keeping a mix and riding out the bad times.

Yes! I have heard that. It goes back to what you were saying about keeping the extremely long view and having patience. Not very easy to do, but probably the best thing for investing. Though the bad times can be really horrifying (I'm thinking of 2008 and the late 90s.) Thank you for explaining about bonds -- there is much more to them than I had realized!