What is the worst investing emotion and how does one avoid it?

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tvubpwcisla
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What is the worst investing emotion and how does one avoid it?

Post by tvubpwcisla »

I often hear people say that emotions might get the best of an investor's account if they are not careful. What is the worst emotion and investor can feel and how can it be avoided?

:oops:
Stay invested my friends.
Slowtraveler
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Re: What is the worst investing emotion and how does one avoid it?

Post by Slowtraveler »

Fear. Both of missing out and of fear of loss.

You have to live through it to be able to handle it.

I started getting fear of missing out during the Bitcoin bubble. It still hasn't recovered to even half of what it was. It was strongest right when it peaked.

The fear of loss I felt during this recent crash was why I knew to go all in. It paid off handsomely.

If you're aware of it- the greed and fear, it can help you navigate them.

Something with no intrinsic value skyrocketing, the fear was so palpable and yet, my knowledge of it helped me wait the necessary month for it to crash.

Practice using logic from your understanding of the situation and you'll get better over time. Own things with intrinsic value like shares of thousands of different companies.
KlangFool
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Re: What is the worst investing emotion and how does one avoid it?

Post by KlangFool »

OP,

Not knowing that you are not that smart.

KlangFool
Normchad
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Re: What is the worst investing emotion and how does one avoid it?

Post by Normchad »

I was going to say "impatience". But I think "fear" is a better answer.

What is fear for $400 Alex?
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Re: What is the worst investing emotion and how does one avoid it?

Post by Normchad »

KlangFool wrote: Tue Apr 28, 2020 9:13 pm OP,

Not knowing that you are not that smart.

KlangFool
Also known as the "Dunning-Krueger effect". https://www.psychologytoday.com/us/basi ... ger-effect. shows up in a lot of places. Certainly applies to investing.
Rosencrantz1
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Re: What is the worst investing emotion and how does one avoid it?

Post by Rosencrantz1 »

+1 to FEAR.

A few ways to help avoid it -

Do not tune into CNBC all day.
During the accumulation phase, buy into equities on a schedule - like clockwork.
Do not obsessively check your account balances.
KNOW your risk tolerance - and set your asset allocation accordingly.
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TheTimeLord
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Re: What is the worst investing emotion and how does one avoid it?

Post by TheTimeLord »

Greed/Envy.
IMHO, Investing should be about living the life you want, not avoiding the life you fear. | Run, You Clever Boy! [9085]
Nowizard
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Re: What is the worst investing emotion and how does one avoid it?

Post by Nowizard »

Allowing common recommendations to become absolute dogma when flexibility is called for as we enter different phases of our personal investment cycle. Avoidance depends on developing the willingness to acknowledge that there are no certainties just the ability to make decisions for which we are willing to assume responsibility.

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Re: What is the worst investing emotion and how does one avoid it?

Post by Triple digit golfer »

Regret after making a decision based on one of the above answers.

Avoid it by setting an IPS while thinking clearly and rationally. Follow it!
retire57
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Re: What is the worst investing emotion and how does one avoid it?

Post by retire57 »

Regret.
Carol88888
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Re: What is the worst investing emotion and how does one avoid it?

Post by Carol88888 »

Jesse Livermore said most of his big profits came from being able to sit tight. But sometimes doing nothing is very hard to do.
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SimpleGift
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Re: What is the worst investing emotion and how does one avoid it?

Post by SimpleGift »

Since no one has suggested it yet, I'll offer: panic!

How to avoid it: It helps to have a good written investment plan, I believe, and to have some knowledge about the history of financial markets. Plus, deep breathing. :wink:
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Re: What is the worst investing emotion and how does one avoid it?

Post by jcar »

The below is a trememdous observation. Though during this crash/correction I didn't go all in I did take available cash and make what I think we're some really good long term buys in utilities and a couple other equities. I spoke with a neighbor today and he said he's waiting for the market to return to it's highs then is selling everything. Not a healthy or realistic approach.

quote=Slowtraveler post_id=5219729 time=1588126324 user_id=129201]
Fear. Both of missing out and of fear of loss.

You have to live through it to be able to handle it.

I started getting fear of missing out during the Bitcoin bubble. It still hasn't recovered to even half of what it was. It was strongest right when it peaked.

The fear of loss I felt during this recent crash was why I knew to go all in. It paid off handsomely.

If you're aware of it- the greed and fear, it can help you navigate them.

Something with no intrinsic value skyrocketing, the fear was so palpable and yet, my knowledge of it helped me wait the necessary month for it to crash.

Practice using logic from your understanding of the situation and you'll get better over time. Own things with intrinsic value like shares of thousands of different companies.
[/quote]
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Ray_McKigney
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Re: What is the worst investing emotion and how does one avoid it?

Post by Ray_McKigney »

I try not to avoid emotions. I try to accept them.

But... I find gratitude to be a strong antidote to fear and doubt. I practice gratitude, and it’s easy to see what I have and be grateful.

I’ve also realized that I’ll never have a perfect portfolio.
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DoubleClick
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Re: What is the worst investing emotion and how does one avoid it?

Post by DoubleClick »

TheTimeLord wrote: Tue Apr 28, 2020 9:31 pm Greed/Envy.
+1. Getting over fear is the first step. Getting over greed is far harder.

Isn't there a quote about selling a fund with high gains being much harder than avoiding selling on a drop?
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telemark
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Re: What is the worst investing emotion and how does one avoid it?

Post by telemark »

Overconfidence. I am absolutely certain of this.
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tetractys
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Re: What is the worst investing emotion and how does one avoid it?

Post by tetractys »

The standard answers are fear and greed. But really I think any negative emotion could not be helpful. Recently science has shone us that emotions are evolutionary developments supporting genetic success that have in many cases become outmoded. Killing your neighbor probably won’t impress his/her spouse so they will mate with you on the spot. The mindful approach to emotions is better adapted to modern times. We observe them as they arise and dissipate before our awareness, and then weigh what we think, say, or do.
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Re: What is the worst investing emotion and how does one avoid it?

Post by H-Town »

tvubpwcisla wrote: Tue Apr 28, 2020 9:03 pm I often hear people say that emotions might get the best of an investor's account if they are not careful. What is the worst emotion and investor can feel and how can it be avoided?

:oops:
Pretty much all emotions that human race has, particularly those: Hubris. Greed. Fear. Envy. Jealous. Anxious.

It depends on people. Some can control emotions. Some don't have emotions. Some have a lot emotions. Best you could do is to develop an IPS stating how your portfolio is managed in any given circumstance.
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Re: What is the worst investing emotion and how does one avoid it?

Post by abuss368 »

An investor thinking they are smarter than the market.
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JakeyLee
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Re: What is the worst investing emotion and how does one avoid it?

Post by JakeyLee »

The worst emotion... Such a great question. The worst emotion (for me) is thinking we somehow have any idea about our fate. I call it the "I can can controll my universe" emotion. You know what I'm talking about. We've been trained our whole lives to tap into our feelings, and then extrapolate what "we knew" after the fact. 2008/2009 seems palatable because we lived through it. We supposedly all knew how bad it was,and how bad it would be... In hindsight we made it out of that bear market...some of us not only unscathed, but wealthier due to buying down and then back up for years.

What's my point, you ask? As some have said before me; I'm not afraid anymore. I've seen this movie before,I know how it ends. Oh, and if it doesn't end the way I promised myself (?).. That's okay too. I'm still so far ahead, having participated in those markets. Having said that, I still fall prey to believing my "knowledge" of current events, the economy, politics, community, and everything else has somehow given me insight. I know better now. I think :shock:
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Re: What is the worst investing emotion and how does one avoid it?

Post by Fallible »

tvubpwcisla wrote: Tue Apr 28, 2020 9:03 pm I often hear people say that emotions might get the best of an investor's account if they are not careful. What is the worst emotion and investor can feel and how can it be avoided? ...
Surely you've heard of fear and greed in all its many forms and experienced both in yourself as we all have to one degree or another? There's lots of good reading out there on these subjects. You could start with WSJ columnist Jason Zweig's book Your Money & Your Brain with chapters on "Fear" and "Greed."

Emotions, btw, are not all bad. :happy
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Re: What is the worst investing emotion and how does one avoid it?

Post by glorat »

The impulse to do "something" for the illusion of control, when news happens
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Re: What is the worst investing emotion and how does one avoid it?

Post by livesoft »

Fear of Aversion to loss. The way to avoid it is to put into one's IPS that one must buy or rebalance on an RBD. Simple.

Another way to avoid it is to have so much money that it just doesn't matter anymore. This is probably one of the reasons that the rich get richer.
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Re: What is the worst investing emotion and how does one avoid it?

Post by meowcat »

Yea, I would say FOMO. Just imagine what it would feel like to stand idly by as a good friend gets rich off risky investments.
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Re: What is the worst investing emotion and how does one avoid it?

Post by Sandtrap »

tvubpwcisla wrote: Tue Apr 28, 2020 9:03 pm I often hear people say that emotions might get the best of an investor's account if they are not careful. What is the worst emotion and investor can feel and how can it be avoided?

:oops:
Emotions are "fear based".
(survival / self preservation)
It's primoridial.

Fear is raw emotion.
It cannot be eliminated or avoided.
But, it can be channelled toward good or bad, altruistic or narcisstic, etc, with training and self discipline.

IE: "Pee Wee Herman - like" or "Navy Seal - like".

j :happy
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Re: What is the worst investing emotion and how does one avoid it?

Post by Sandtrap »

livesoft wrote: Wed Apr 29, 2020 2:59 am Fear of Aversion to loss. The way to avoid it is to put into one's IPS that one must buy or rebalance on an RBD. Simple.

Another way to avoid it is to have so much money that it just doesn't matter anymore. This is probably one of the reasons that the rich get richer.
+1
I've known quite a few depression era or depression era descendents who's strength of purpose motivated them to great wealth (from nothing). Base emotion: Fear of poverty. (despite having more than enough).

IE: stories from old folks of the "poverty years" of food rationing, and oppression, persist for a lifetime.

j :happy
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Re: What is the worst investing emotion and how does one avoid it?

Post by livesoft »

livesoft wrote: Wed Apr 29, 2020 2:59 am Fear of Aversion to loss. The way to avoid it is to put into one's IPS that one must buy or rebalance on an RBD. Simple.
It should not need to be posted, but the above statement is NOT -> ... buy or rebalance only on an RBD.

However, people in the past have jumped erroneously to that conclusion.
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Re: What is the worst investing emotion and how does one avoid it?

Post by Independent George »

telemark wrote: Tue Apr 28, 2020 10:57 pm Overconfidence. I am absolutely certain of this.
Everyone seems to have this problem except for me.
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