The 10 tips that will help you manage your emotions when investing

1) Take a test to define the investor profile

There are plenty of options on the web that, through various questions, will help you understand “what type of investor you are”. The result will not only determine how risky or safe your investment should be, but it will also allow you to determine what you are like when it comes to money. For example, you will find yourself with hypothetical questions about how much money you are willing to lose. The result will be if you feel more comfortable in a traditional investment with less profit, or in a risky one but with more possibility of increasing your capital.

2) Learn to build an investment portfolio

The previous point will be very useful for this one. If you are more fearful, or you are afraid of losing your capital, it will be important to make more conservative investments, probably in fixed income. If you are bolder, or can risk more capital, you can get into more dangerous investments. Specialists recommend, however, to diversify the capital. What is known as “not putting all the eggs in the same basket”. For this, a stock broker who knows your profile can help you.

3) Do not become paralyzed in the face of the error and capitalize on it

There is a term in finance known as Stop loss, or learning to cut losses. And this is what we mean by emotion management. If I impose a plan on myself and it doesn’t turn out the way I want, what do I do? Do I stick with the original plan or am I flexible along the way? sometimes it is important to recognize when and how to stop. Not only the variables of a graph will determine it. Parsimony and humility are also required to recognize mistakes and look for alternatives.

4) Get in touch with how you feel when something doesn’t go as expected

This item is probably the continuation of the previous one. But the exercise is very simple. For example: I am in front of a quote sheet and I see how my investment falls, I try to register how I am feeling. Am I agitated, nervous, can’t stop thinking? Knowing how we function when something bad happens will help us make better decisions. If I’m impulsive and I know that’s led me down the wrong path, it’s probably helpful to learn to brake at the right time.

5) Detect psychological barriers

If I get in touch with how I feel when things happen, I will also be able to detect which are the aspects of my personality that do not help me when it comes to to invest. For example, I can learn to recognize that uncertainty makes me afraid, and when I am afraid I make hasty decisions. Or I can accept that I am greedy and tend not to go out weather of investments.

6) Understand why and for what we are going to make an investment

This will be key to defining the action plan. What is the objective of making said investment, what is the loss that I am willing to bear, what will be the financial objective to meet to get out of it, for how long. All these decisions will define my actions, help me create a plan, and take me to a field of greater peace of mind.

7) Do not get carried away by outside pressure

Many times, social networks or even other people with whom we exchange information can influence our thinking and even lead us to make decisions that we would not have made before being exposed to them. It is important to take a few minutes and reshuffle your thoughts. Would I really make this decision or am I just acting like someone else would?

8) Do not invest without understanding what it is about

Many times out of shame at what they will say, we do not admit that we do not know. Or we believe that because someone presents us with a complex investment, it will be profitable for our capital. Training is the most important thing when it comes to investing. Go little by little, understanding what is being done and knowing the variables that could happen. You have to fully understand how and where the capital is being invested. If we do not do so, we run the risk of falling prey to scams.

9) Avoid falling into confirmation bias

Confirmation bias is a way of acting that leads us to want to confirm that idea that we previously had. Thus, when we decide something we look for information that leads us to ratify that premise. With this mechanism we tend to make all data that conflicts with our opinions invisible.

10) Constancy, constancy, constancy

If we have a clear objective, it is important not to let ourselves be overcome by external or internal problems that could happen to us along the way. If one investment goes wrong, it could be a great learning curve for the next one. If I don’t understand too much about a topic, I’ll have to spend more time on training. If I realized that I can risk more, I will do it next time. The important thing is to give yourself time to face a learning process.

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_{*journalist specializing in finance, psychological consulting student}