Avoiding Emotional Investing

Avoiding emotional investing is a hard yet essential aspect to successfully navigating the financial markets. The market cycles are truly dynamic and the fluctuating highs and lows can lead to emotional buying and selling; these are harmful to a portfolio as investors are tempted into buying at market highs and selling out in the lows, often due to fear and greed from financial news.

The Right Mindset 

Being able to keep a cool head when the markets are volatile will help to ensure rational decisions are being made, rather than emotionally charged decision making. Taking a realistic and rational stance on your investments is essential to ensure your portfolio isn’t damaged by your emotions. Understanding that short-term fluctuations whether highs or lows are not inherently an indication to react, especially if your medium- to long-term portfolio is designed to weather the volatility of the markets.

Some emotional biases to avoid are:

  • Overconfidence — be careful here. Overstating your abilities when investing can lead to chase greater returns without remembering investment risks, especially if you compare yourself to others. Remember that your portfolio is for you and your risk appetite. 
  • Winners & Losers — whilst you may be holding assets for the long-term and can ride out down periods, knowing when to cut your losers is just as important on a fundamental level, not whether you simply want to try and break even. At the same time, make sure not to cut off your winners too early — ask yourself, why you would want to sell the gains for profit? Do you need it, or are you just wanting to cash it in because it is attractive? Remember why you are saving and your investment horizon.
  • Self-control — classic human behaviour is to focus on our short-term efforts, as we feel their effects greater than plans made for anticipated benefits in the future. Motivation is higher for shorter term goals, yet neglecting your future financial needs lead to more risk-taking, harder work and insufficient savings when you want them.

What You Can Do 

Automate Your Savings 

This a fantastic way to ensure you are saving for your future without having to worry about it. For example, regular monthly savings not only creates discipline but also implements dollar-cost averaging to ride the financial markets’ ups and downs. Automating this from your bank account means it can be done swiftly and efficiently, taking away the temptation to spend that money elsewhere. 


Holding a diverse portfolio can help implement consistency in your investing, rather than any favouritism resulting in an unbalanced set of investments and allowing market volatility to hit your returns even harder. Being diverse helps to make well-rounded returns, where losses in some areas are bolstered by the gains in other areas — the various submarkets rarely move together, so diversification spreads out the risk.

Understand Investment Risks

Knowing the risks that come with investing will help keep you level-headed as your investments move up and down in the financial markets. It can also help you set a realistic risk appetite for your personal decisions, as most people new to investing are too risk-averse for their timeframe and are losing out on returns in the younger stages of the portfolio. 

Ride Through Volatility 

Data shows that more often than not simply riding out market volatility provides the best returns over the long run. Market timing is difficult and a gamble at best, although some moments are worth it, such as buying when the markets are low. With a medium- to long-term view and careful portfolio construction, it’s often better to keep holding your assets until you truly need them in the future. 

Seek Financial Help 

There is no harm in asking for help if you feel uncertain about investing and worry your emotions may negatively affect your outcome. Guidance from a professional can take away emotional biases, even helping to identify ones you didn’t know you were doing. Having someone assist in the management of your portfolio can ensure rational and realistic decisions are being made, from an objective and holistic view by understanding your needs and desires.  

Where To Find Help?

There are numerous and varying levels of resources available and admittedly this can be overwhelming for the budding investor! So, here are some suggestions of mine for different approaches:

Going Solo 

If you want to tackle it on your own, you need to do your research! First things first: do not simply listen to the news! Daily news often incites fear and greed, both the archnemesis of solid investing. Instead, pick some reputable sources and take the time to apply this research to your own position. 

The internet is full of information — pick sources that are related to the financial industry, not simply what you may have seen on social media or heard at the pub! 

A favourite of mine for medium- to long-term investing — and honestly speaking, you could find all you need here — is Morningstar. Here you can find all things related to financial news, stocks, funds, portfolios, professional tools and more. Rifle through their wealth of knowledge and you can set yourself up a fantastic investment portfolio.

Robo Advisory

There are many options nowadays where you can plug your funds into computer algorithms and let the tech manage your investments. They are a great cost-effective option with no human interaction (if that’s your thing!), where mostly you provide your risk level and time horizon, leaving the rest to the computer model. 

These are great for investment management by moving around and rebalancing your assets for you but don’t expect them to help you out with personal finance issues and comprehensive financial planning. 

A Robo adviser can strip away all emotions for you, yet so much so that it doesn’t account for your own financial position. Whilst not letting your emotions make negative decisions, it is important to know what decisions need to be made for your own sake. A Robo adviser simply doesn’t know you as a client.

Financial Advisory

The human touch. Besides investment management, financial advisers often address your financial situation as a whole, at a holistic and all-encompassing level. Naturally, they are paid a fee for this service and are a slightly costlier option versus a Robo adviser (or doing it yourself), yet offer a wider range of services for the individual. 

Robo and Financial Advisers have the same goal, whereas traditional advisory shines when it comes to balancing the emotions involved when investing on behalf of their clients. Part of the adviser’s job is to scrutinise all aspects of your life and draw up a tailored plan by using both objective and subjective analysis; they can assess your situation and offer unbiased guidance, highlighting areas that need addressing that you yourself may not be aware of.

A financial adviser doesn’t simply strip away emotions — they manage them, offering realistic and rational solutions that a client may not be able to figure out themselves due to their own biases. Comparatively, Robo advisers are largely fixed on data (for the time being), rather than analysing clients as a whole. 

One way to think of this is as follows:

“At the end of the day, investing is not just about manipulating data…Robo advisors can handle data efficiently and probably faster than many human advisors, however, there is more than numerical data involved in decision making,”

“Would you take a computer statement that you have a serious physical problem at clinic and walk out? Would you not want a doctor to explain the diagnosis and prognosis? Robos screen for opportunities without taking the pulse of the client.”

(Charles Marleau)

* * *

It is important to weigh up all options that are available to you and ask yourself the question: Am I confident that I won’t let my emotions negatively affect my investments? Can I do it myself, or would assistance from elsewhere be best?

Take the time to do your research and decide whether you want to do it alone, use a Robo adviser or seek financial advice — maybe even a mix.

Don’t rush, but do remember that getting started is often better than delaying your investments.

After all, time is money!

Want some help? It’s what I do!

If you have any questions, are seeking advice, or would like to arrange a consultation, drop me an email at

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