Wouldn’t it be nice if you could make wise decisions about whether to buy or sell a stock based on how you feel? In fact, emotion is the very last thing you want ruling your investing moves. Before you act on those “vibes,” remember that the best investment decisions come from a clear head and a rational mind.
Here are some ideas that can help you put reason, rather than emotion, in charge of your investing behavior.
Be True to Your Goals
You probably had specific goals in mind when you chose investments for your portfolio. Switching investments impulsively could put your plans in jeopardy. Avoid making sudden changes until you’ve had a chance to consider how they might affect your ability to reach your goals.
Everybody’s Gone Surfin’
Everyone loves a winner, but buying a rising stock at the wrong time may put you on the other side of the swell. Before you impulsively invest in that “hot” stock, take time to consider whether its wave may already have crested, putting you at risk for losses.
Help Me Get It Out of My Heart
Being emotional about an investment has another pitfall. Investors may become so “attached” to a company that they hang onto a stock even when its long-term performance suggests they should move on. If a stock consistently underperforms its benchmark, you may want to cast your emotions aside and replace the investment with a stronger performer.
Feelings, Gonna Shut You Down
You can take emotion out of the sell or hold decision by issuing a stop-loss order. This will trigger the sale of your shares if their price drops to a predetermined level or by a certain percentage from your original purchase price.