8 Warning Signs You’re An Emotional Investor

Those who are successful with their investment portfolios understand they’re playing a long-term game and sticking to a plan is the key to achieving their goals.

Emotional investors, however, tend to get caught up in the day-to-day fluctuations in the market and can often do themselves a disservice (and cause themselves undue stress) by making rash decisions.

Do you think you might be an emotional investor? Here are eight signs to look out for.

You’re Addicted to Financial News

If you have financial news stations blaring 24/7, it’s quite likely your emotions are being manipulated by those who don’t have your best interests in mind and you’re an emotional investor. Financial news pundits are paid to incite fear and panic and if you’re buying into it, you’re likely making bad decisions based on false information. Turning off all the news — especially financial news — will make a huge impact on your level of happiness and your success as an investor.

You Buy Stocks Just Because Other People Are Doing It

Peer pressure or popularity should have no place in your investment strategy. If you pressure your advisor to buy a stock — or you buy it yourself through your day trading account — just because it’s in the news or because your next door neighbor just invested in it, you’re probably an emotional investor. Stick with sound advice from your advisor and ignore what all the “cool kids” are doing if you want to have financial success.

You Can’t Deal with Your Stock Losing Money

Any good financial advisor will tell you not to check your investments daily. Why? Because you’re likely to freak out if you find your portfolio has lost money (or get too cocky if it’s made a gain). Daily fluctuations in the market are a reality and paying too much attention to them is a major cause of stress for emotional investors. Listen to your advisor and focus on the big picture instead of on the everyday volatility that will more than likely even out in the end.

You Pay Way Too Much Attention to “Big Tips”

Overhear a “big tip” in the lunch room the other day? Read way too much into a news story about a hot new stock that will make everyone who invests in it a millionaire? If you focus on tips and use them as a basis for which stock to buy, you’re an emotional investor.

A real “tip” that is based on credible information from someone in the know equals insider trading and it’s a crime. All other tips are just hearsay and conjecture. Will one of these tips pay off every once in a while? Sure, but you’ll waste time, money, and your sanity if you chase every tip that crosses your path.

You’re Always on the Phone with Your Advisor

Advisors have names for clients who call them every day to complain about investments, vent, or ask for changes to their portfolios: pains in the rear end! Emotional investors simply cannot trust their strategy and must constantly check in with their advisor to make sure they’re on the right path. Trust your portfolio and put down the phone.

You Focus on Unrealized Profit or Loss

When you check your investments too often, it’s easy to focus on unrealized profits or losses. An unrealized profit is what you would gain if you were to sell a stock after it has risen in price (and an unrealized loss is the opposite). However, if you don’t sell the stock (which you usually shouldn’t do), it has no impact on your portfolio. Emotional investors tend to celebrate unrealized profits and mourn unrealized losses, even though they never actually make a big difference in their bank accounts.

You Hold On to Stock for Personal Reasons

Did you buy stock in the company that makes your favorite ice cream? Did you hit the “buy” button because you thought the name of the stock was similar to your daughter’s? Or are you holding onto stock from the first corporation you worked for because it’s where you started your career? Buying or holding onto stocks for reasons other than their ability to make you money is never a good idea — and it’s a sign you’re an emotional investor.

You’re Constantly Thinking About Your Investments

Investment and retirement planning should be about working with and trusting a professional advisor so you can free up your time and energy to do other things. Emotional investors, however, are constantly thinking about their portfolios, second-guessing their advisors, and generally making their own lives miserable. If this sounds like you, it’s time to turn off the financial news, close out of your investment accounts and focus on what you can control.

Emotional investors tend to make their lives and their advisor’s lives much more difficult than they need to be. If any of the above warning signs sound familiar, it’s time to step away from your laptop and television and trust that your strategy is solid and will pay off in the end.