What we'll cover
Common investing mental blocks
Mental hacks to keep you motivated
How to stay focused on your goals
Don’t get intimidated, though. It’s you versus your brain’s natural tendencies, but you can work to overcome them with a little bit of effort and intention. Try these five mental hacks to help tame your emotions and potentially strengthen your portfolio (and your mojo) for what comes next.
Deflect hyperbolic discounting
Solution: Break your big decisions into smaller ones and tackle those small goals one at a time. That could mean investing a little at a time or starting to explore that stock you’ve always wondered about. And start early (it’s a smart move in life and investing). By keeping future, you and your retirement in mind, you’ll actively work to beat hyperbolic discounting and its analysis paralysis.
Don't let risk compensation send you into a panic
Solution: When stocks slide, remember your long-term goals. Is your plan to stay in the market for 10 or 20 years? If so, it may be wise to take deep breaths and stay on your course. Why? Because markets go up and down. It’s the natural rhythm of investing. Your brain’s risk compensation may tell you to run, but your best bet may be to act in line with your goals and plan.
Check your ego to overcome Dunning-Kruger
Markets can change quickly, and things that work today may not work tomorrow. Different sectors and markets can top the chart as time goes on, depending on economic conditions, political events, regulatory changes and unforeseen events.
As an investor, it can be tempting to jump at each and every change. Resist.
Be wary of jumping on the bandwagon effect
Solution: Find your purpose by starting with honesty. Determine your why. You’re investing to make money, but what you’re using those funds for is what matters. It can be helpful to dig deeper and get more specific. Maybe that money you’re making will go towards a down payment on a home or saving for your kids’ education. Whatever the mission is, having a time or price target for your investments can help you decide when it’s time to buy or sell a position. Let the numbers guide you, not your emotions.
Keep your head out of the sand (and the ostrich effect)
Learn to digest each headline based on what it could do to your own portfolio and goals, not somebody else’s. If you’re a long-term investor looking several years into the future, 99% of headlines probably won’t impact you’re the pursuit of your investment goals. Some of them are just little speed bumps on your journey.
A clear head and an eye on the future
In today’s world, there’s no shortage of distractions, and the stock market is no exception. Making matters even more challenging, our own brains often work against us, making it difficult to see the big picture. Keep calm, stay your course and remember that in the stock market (as in life) tomorrow is always a new day.
