A quick Google search using the phrase “emotions and investing” will net you a few pages of articles that tell you 1) emotions don’t have a place in investing, and 2) how to remove your emotions from any and all investing decisions. Particularly in the wake of the most recent presidential election, when the market saw a significant after-hours tumble following a widely unanticipated result, to be followed by some intense volatility during presidential tweet-storms and shortly after Inauguration Day, many finance professionals are sounding the alarm bells: get your emotions out of your investing decisions.
But what if your emotions don’t have to be the big elephant in the room sitting between you and good investing choices or higher returns? What if your emotions could be a positive player on your one-person investing team? Here are a few ways you can start reexamining your emotions and whether they mostly help or hurt you when it comes to your decisions in the market:
Why do we think that we would be able to leave emotions at the door in investing decisions? Perhaps instead, it’s better to recognize that we have them, understand what they are and what we might be emotionally reacting to, and use that knowledge to make the best decision for ourselves.
There are a lot of professionals who might tell you that it’s best to set your emotions aside when investing, and move toward the more utilitarian option. That’s not necessarily bad advice: we should be looking for utilitarian moves when investing. But to think that one can separate or disconnect one’s emotions from themselves when looking for utilitarian options is short-sighted. In order to make the best option, it’s important to first be aware of our emotions and how they are influencing our decisions (fear of loss or fear of failure), evaluate how important those particular emotions are to you (Will I lose my house?), and then make decisions in a balanced way.
Our emotions aren’t going anywhere, and it’s foolish to believe we can disconnect them from who we are. Your best bet as an investor is to instead understand what they are, hear them out, and then use logic and utility along with emotional responses to make the best investments for you and your personal financial goals.