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Can you take the emotion out of investing?

Is there a best time to invest? Is there a better mind set to be in when investing? Or is it something you should just get on with?

It’s very easy to say put your emotions to one side and make decisions based on the facts in front of you. But when there’s money involved, and your livelihood at stake, everything becomes somewhat emotional.

That’s why we’ve created a FREE eBOOK to help you make cool, calm and collected investments. Shedding light on those emotions that could be governing your decisions, and suggesting a few simple ways you can help put these emotions to one side.

Download our guide to taking the emotion out of investing.

 

Emotions can impact your investment choices

When it comes to money, emotions – even positive ones – can lead to bad choices. A recent study showed that when markets are rising fast, excited investors are more likely to buy without asking questions, pushing prices higher.1 This can lead to market bubbles – and we all know what happens to them.

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By making an investment, your capital is at risk.

On the other side, emotions can also make you over-cautious. Another study revealed that people who were unable to feel emotions because of brain injuries made more money than those with healthy brains, because they were less fearful.2

Emotions impact your investment choices in a range of ways. From making you over-analyse every little detail so you are paralysed by an information overload, to encouraging you to overlook the facts and favour what is familiar. Emotions make it difficult for anyone to make objective choices, and when markets are moving quickly you need to be able to make emotion-free snap decisions.

Avoiding emotions when investing

So what’s the prudent investor to do? Most people are, to varying degrees, prey to emotions. Money itself is a pretty emotive subject: it’s intimately linked to all life goals. And because it involves taking a risk, investment is always going to bring your emotions into play, which could lead to you to take more – or perhaps less – risk than you need.

You can of course choose to outsource the whole business of investing to someone like Moneyfarm. Even if you do this, it’s worth being alert to the pitfalls of emotional investing so that you always take a cool-headed and ultimately more pro table approach.

1 Bubbling with Excitement: An Experiment, May 2015
2 Investment Behavior and the Negative Side of Emotion, 2005

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