To Be A Good Investor You Need This One Thing

By Guest Writer | Investing Tips

Nov 28
Investing

Learning how to invest is a major mind game. It is intellectual, as you assess stocks current and future value, and it is emotional, as you manage the excitement, hope, fear, and greed that is an inevitable part of the investing process.

That emotional side, the one most likely to cause you to financially face plant, is one of the few things in investing that is 100% within your control.

And that makes honing the investor mental game a top and ongoing investing priority in my book. One of the biggest dogs you’re got to keep leashed is impulsivity. Both fear and excitement can make you hit the buy or sell button too quickly leading to regret; sometimes within seconds. Ask me how I know.

Read Also: Best Investments For Millennials 

Your impulse/act fast center of your brain is a long-distance call away from your rational decision-making zone. So your mission, which I urgently suggest you accept, is to learn how to deftly switch from impulsive to thoughtful decision making when it comes to your investing mindset.

Doing this is not in the least bit mysterious and will sound ridiculously simple because, well, it is ridiculously simple. Adding any of the following four suggestions to your life will teach your brain how to move from “do it NOW” to “let me think about that” quickly and on your command.

To Be A Good Investor You Need This One Thing - To Be A Good Investor You Need This One Thing

Invest In A Time Out

Consider investing decisions when the markets are closed or, better yet, do as I do and review stocks on the weekend. Yes, waiting may cost you a few pennies in stock price but it can save you dollars in mistakes. What looks really exciting on Saturday, can strike me differently by Sunday night. Requiring myself to take time has saved me from making quite a few poor investments.

Invest In A New Routine

Did you know that doing routine tasks with your non-dominant hand gives you a handle on impulsivity? I recently learned this and here’s how it works: I’m right handed so I decide what I am going to do with my left hand this week and do it: turn on the faucet, open doors, close drawers—it doesn’t have to be fancy.

The point of this exercise is that every time you start to reach with your usual hand then catch yourself and change hands, your brain is getting better at catching itself and making another choice, ie: getting less impulsive. How easy is that? This can apply to how you invest because when stocks are on a downward trend, you’ll want to buy more and not sell more.

Invest In A Couple Deep Breaths

Ever gotten the advice to slow down and take a few deep breaths? I have and there are very good reasons to do so. The main one? Your brain believes your body. When you slow your breathing, your brain starts to calm down. And you need your brain to calm down so you can think clearly.

Stress actually causes the blood in your brain to leave your rational thought area and rush to the RUN-FOR-YOUR-LIFE zone. When your brain gets hijacked by that part, good decision making is, literally, not possible. So when you feel that happening, stop, inhale deeply and let it out as slowly as you can.

Drop your shoulders, relax what you can relax and breathe slowly again. And again. With practice, you will feel the calmer good decision making part of your mind coming back online. As an investor, this can be the difference between selling a stock too soon and buying too late.

Yes, really. No, you don’t have to sit cross-legged, wear a loincloth or chant “Om” as you are looking at potential investments. You just need to get quiet and focus on a word, image or your breathing.

It’s that effort to focus that is important. Practicing that is like calisthenics for your brain. Regular meditation increases the blood flow in your frontal lobe—your decision-making center. In fact, apparently, the harder meditation is the more helpful it can be.

This is excellent news for me since meditating is a bit like trying to corner a greased pig, Or, how I imagine that would be: messy, frustrating and seemingly impossible.

Anyway, I do regularly attempt meditation and see immediate benefits when I do. Each of these suggestions is free, simple and we all can implement them. Doing any one of these will help you to manage one of the banes of our investor-selves: impulse.

To be a good investor, you really need to be good at recognizing yourself first. This means you have to invest in yourself before any stock or company you may be interested in.

When you get control over these basic ideas, you will be less likely to sabotage your own good plans on a moment’s notice and hopefully become a more calm and smart investor.

Sarah Wilson blogs about investing for Netvest

Related: Turn Your Spare Change Into An Investment Account With Acorns

 

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