Emotions are a part of human nature, in a sense, emotions make us human. But, it is how we control these emotions that is essential for making successful decisions. Emotional control is vital in order to properly apply one’s knowledge in the decision-making process. A lack of emotional control leads to impulsive decisions driven by feelings rather than conscious decisions based on logic.

Tips for Successful Emotionless Investing

Emotional Neutrality, the concept of removing human emotions from financial and investment decisions.

Build a strong investment plan and stick to it to ensure you are making decisions based off logic and not emotions.

Do not follow the herd. Don’t let market noise and herding tendencies distract you from your original investment plan.

Do not let Volatility scare you, remain focused on you financial goals and continue to aim your reach accordingly. A sudden move made out of fear could lead you to miss some of markets best days.

Practice Patience¹. Immediate solutions are everywhere, many found in the palm of our hands. However, instant gratification is not found in the investment industry. You must make quality investments and hold them throughout the complete investment term.

Rebalancing and Diversification can help you properly adjust your portfolio without making impulsive decisions based off emotions. True diversification across asset classes allows you to rebalance in those wild moments when markets sharply diverge².

The graph above captures a variety of emotions at different levels in the investment cycle. You can see investors tend to feel a sense of euphoria at the same point of the maximum financial risk, followed by a steady drop leading emotions to fall into a fearful state during the point of maximum financial opportunity. Here, investors tend to trade off based out of depression and fear right before the market picks back up, resulting these investors to miss some of the best days in the market.

As investors, it is important to remove the emotional factor in your financial planning and steer the course based on data and not feelings. A professional advisor can help provide support for managing emotions and making logical investment decisions.