October 2, 2013 in 3rd Guide - Portfolio Building
Controlling emotions for investing success
Controlling emotions for investing success is a skill of superior investors. Managing the power of emotions gives skilled investors advantages in markets.
Portfolio Building That Works Money, lesson 5, covers an essential skill of superior investors, using the power of emotions to develop superior investing skills. Links at the end guide you to related content if you want to learn more.
What’s in this lesson for me?
This lesson tells you the importance of learning, knowing and using the power of emotions to produce superior investing results. Being aware you can add the power of managed emotions to your investing skills gives you a way to grow as an investor.
Emotions useful for investing success
By learning, knowing, using and managing the power of emotions, superior investors produce excellent returns. Controlling emotions for investing success can put you in control of your responses and actions. That is why superior investors know and use emotions as part of their investing success.
Control your actions by using emotions! Knowing and using them means having control of your actions in response to emotions. Our human feelings often produce actions and for investing success its actions that count! so we must get comfortable by learning, knowing, using and managing our emotions for investing success.
Superior investors recognize emotions as intimate parts of their being a human. Denying or thinking you can turn emotions off and on is foolish. Emotions are as important as your heart or brain to investing success. To be the best investor you can be, you absolutely must control your actions, your behavior. Waste no time or energy attempting to control your emotions. Rather know them and understand them to manage them. With understanding you can control your response to emotions - your actions.
A seismic shift in investor thinking has been under way for a very long time. Now going mainstream, emotions are being acknowledged as a core part of the investing behavior of humans.
In fact the topic is the psychology of humans making financial decisions. I have always simply referred to it as the emotional aspect of discussion making.
Investing success needs controlled emotions!
This change is good. In fact this is great! Both the realization and acknowledgement opens the door to achieving greater understanding. Research into this broad area has the potential to produce better investor knowledge, behavior and results.
Being aware of it helps you become a better investor and contribute to growing your wealth. In my view emotions are at the very core of both human behavior and decisions. I have thought that for many years and used to think I was an extreme outlier compared to how most investors thought. But now as these thoughts become more mainstream I can claim the world is catching up.
How I got there
The senior investors of my era and earlier most often denied that emotions played a role. If they acknowledged emotions at all in investing decisions, they advised leaving them at the door. I presumed they must have picked them up on the way out!
I never managed to do that as my emotions stayed with me at all times. They were and are an intimate part of me. The same is true for you and every other investor. Use this knowledge to your advantage!
I was in the room
I witnessed trading, investing and business decision behavior time and again over a long and varied career. That consistently demonstrated the presence of emotions in all participants.
My business career was a long series of turnaround projects. Witnessing humans under professional or financial pressure taught me that emotions play a significant and core part in decision making. No exceptions! Emotions of the principals involved were always evident. I have seen nothing like the prospect of someone losing their business or a significant investment to focus their attention! At a minimum it was life changing!
Control actions - use emotions!
When operating as a principal or an agent of a creditor it was enlightening to see the variety of decisions and behaviors. Very frequently mood and emotion were major factors. They could strongly influence critical decisions that affected the futures of many businesses, individuals and families.
As an independent operator I was always forthcoming with ideas and recommendations. At times an obvious and straightforward solution was missed. Principals under extreme pressure can make very bad decisions.
Learn - don’t act against your own best interest
At times actions taken by some people under psychological pressure were directly against their own best interest. Under such pressure individuals and groups can produce both the best and worst behavior and decisions. Some became mentally paralyzed and were completely unable to function. Others displayed brilliant performances.
Those experiences seared into my brain the belief that emotions are at the very core of decisions. Emotions were always present and inseparable from the individuals and groups involved. The best outcomes were most often achieved by those who controlled their actions in response to extreme emotions.
The very best were those that used the valuable contribution of emotions while understanding the psychology of the various humans involved.
Learn to do the same and you will become a superior investor.
Why this lesson matters
Being aware of the importance of learning, knowing and using the power of emotions to manage your investments opens the door to superior returns. Being informed that superior investors add the power of managed emotions to their investing skills gives you a example to follow to investing success.
Key take away points from lesson 5,
Controlling emotions for investing success:
Controlling emotions for investing success is a skill of superior investors. Managing the power of emotions gives skilled investors advantages in markets.
- Investors use and manage emotions for investing success.
- Emotions are an intimate part of investing.
- Investors control actions by using emotional management.
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Portfolio Building That Works Money:
Introduction to Building Money Working Portfolios Lesson 1
3 Portfolio success keys Lesson 2
Stock holding size matters Lesson 3
Costs drive portion size Lesson 4
Controlling emotions for investing success Lesson 5
Join exceptional wealth builders Lesson 6
Pyramid portfolio wealth building Lesson 7
Next lesson 6:
Join exceptional wealth builders
Have a prosperous investor day!
Bryan
White Top Investor
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