Manage Your Emotions (Key Investing Principle #8 of 10)

By Jeffrey Meenes, CFP® (Published Date March 9, 2023)

The U.S. stock market has been an engine for wealth creation throughout the past century. This is especially true when investors are mindful of how markets work, what strategies deliver success, and what not to pay attention to. 

How exactly can a successful investor approach the markets? In this blog tip series, we highlight ten principles an investor can follow to create a better investing experience and generate consistent returns over time.

Key Investing Principle #8 to Improve Your Odds of Investing Success: Manage Your Emotions

Investing involves buying low and selling high, but many individuals struggle to detach their emotions from the process. Emotional responses can lead to reactive decisions and poor investment choices, such as purchasing at high prices and selling at low prices during market fluctuations. The 2008-09 global market downturn, and the Coronavirus Crash of 2020, are prime examples of how the cycle of fear and greed can influence investors, causing some to withdraw from the market just before it rebounds, locking in their losses and missing out on potential gains.

While our innate behavior to seek out predators and react to warning signals may have helped our ancestors survive, it can make it difficult to make rational investment decisions. Losing money is a highly emotional experience for most people, which is why investing requires a continuous battle between logic and emotion. As Dr. Daniel Kahneman, the 2002 Nobel Prize Winner for Economics, once said, "The more emotional an event is, the less sensible people are."

Focus on what you can control.  A fiduciary financial advisor can offer expertise and guidance to help you focus on actions that add value. This can lead to a better investment experience.

At Meenes Wealth Partners, we never rely on emotions or gut feelings to determine when to buy or sell. Our approach relies on a set of firm rules and systematic steps that are repeated deliberately. This method ensures that our investment decisions are based on a disciplined approach, which is crucial for long-term success, even in the face of market volatility.