While there’s nothing inherently wrong with consulting your emotions when making purchasing decisions, stock buyers do need to beware of relying too heavily on their guts
Here are four emotions you should watch out for in order to protect your investments.
• Envy: One person’s strategy doesn’t always fit another’s life circumstances or monetary constraints.
“Studying a fellow investor’s success is smart. Trying to copy and outdo him out of jealousy nine times out of 10 will get you nowhere,” said Justin Kirk, an acquisition and investment associate and former portfolio analyst.
• Fear: It can drive you to risk too little and affect your ability to reach financial goals.
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“My 32 years of advising folks suggests that the No. 1 mistake investors make is when they panic. It is fear, which causes people to act on an impulse and sell. Impulse is not an investment policy, ” Paul Ruedi, CEO of Ruedi Wealth Management
• Hope: It’s good to be optimistic, but having misplaced hope — or inflated expectations — can spell disaster for your portfolio.
• Stubbornness: It rarely pays off in the world of investing.
“Part of the problem people have with giving up hope is that they’d have to admit they were wrong,” Kirk said.
It’s good to have faith in your abilities. However, if you refuse to listen to reason, you could quickly put your investments — and your money — at risk.