How do you avoid emotions that get in the way of growing your money? Here are three practical tips and a chart of emotions to get you started!
Full Transcript:
Hello, welcome to Arista Advice! Question of the week is: "Paul, how do I avoid my emotions that get in the way of growing my money?" It's a terrific question!
Allowing emotions to dictate our decisions is a common mistake made by all people from those at the high income and those to the low and just starting income. Let me share with you three steps that you can take to keep your emotions in check.
Number one: maintain a growth mindset. Statistically, there's a lot more sunny, shiny, sun-filled days than there are dark cloudy days.
Number two: learn from the past and put in place ways to avoid repeating the past that will cause you to make decisions with your wealth that cause you to separate your wealth from yourself by selling and trying to wait things out.
Number three: avoid making quick, dramatic, hasty decisions. This can help you avoid decisions you might regret.
As you'll see here, here's a chart of emotions, starting at the bottom of uncertainty, leading to optimism, leading to enthusiasm, leading to euphoria, and leading to overconfidence. Then it's soon followed by anxiety, denial, panic, frustrations, capitulation, agony, depression. What follows after depression? Going back to the beginning, which is uncertainty, optimism, and enthusiasm. Where are we right now in the equity market? It depends on the chart of emotions. Where have we been? It depends on the chart of emotions. Where are we going? It depends on the chart of emotions.
Investors are prone to falling into the sentiment cycle at any time, but especially when things get rough. The sentiment of emotions are always up and always down, and the best remedy is to not get wound up and to get our minds wrapped around too much in the emotions that the equity markets produce on a daily basis.
There was a study by Fidelity that I quote often. They went and did a study, and the individual investors that didn't have a user ID and a password to access their account did better than those who were logging in every day to check their account. It's a long-term study that's been used many times and discussed many times.
Always remember, go to AristaWealth.com to get other tools, tips, and videos and resources to help you live a life of significance.