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Op-Ed: How to prevent your emotions from ruining your investment

By Jenna Cyprus     Aug 25, 2013 in Business
Emotions play a big part in the human society, but sometimes we find them in the way of our own success. What emotional limitations should be observed when investing?
We are an emotional bunch, the human race — an emotional bunch that, fortunately or not, lives in a world that is run primarily by a series of strict guidelines, algorithms, and generally emotionless monetary values.
And while not all success is determined by a persons' propensity to live a completely rational, pragmatic lifestyle, there are some parts of this world that are best left to those who can put their emotions aside — or, at the very least, understand and control them.
The best traits for traders
Trading stocks, or playing the stock market, isn't a game for the faint of heart. Though it isn't nearly as dramatic as the Hollywood representation of Wall Street (though really, what is as dramatic as a Hollywood representation?), it does take a certain mindset, a willingness to lose before you gain, and a tendency toward attention to detail and conscientiousness.
But who is really on top in the world of Wall Street?
Risk-takers
We aren't talking about those who mindlessly blow money on stocks based on petty gossip or stories on the evening news. The best traders are those with a series of skills that enable them to take risks, while simultaneously knowing the meaning of the risks they are taking, and being prepared for the consequences.
The way the stock market operates, you must be willing to lose in order to make a profit. Investments are frightening, and people who tend to regret their choices highly won't be as willing to take the risks necessary to make that profit. Studies show that young men regret their bad decisions the least, while older women are more likely to be cautious and refrain from making decisions they might regret.
The conscientious
Conscientiousness is a trait that completely relates to attention to detail, ability to track and recall facts, and a tendency toward organization. Women are typically more conscientious than men, and older folks more conscientious than younger.
A trader must be conscientious in order to make good decisions. Ideally, the trader would know why he or she is making the choice to trade, buy, or sell, what the person wants from the investment, the potential for loss, and what's the back-up plan in case of sudden losses.
Though it seems that these are opposite traits for an aforementioned risk-taker, these traits need to come together to create a balanced risk taker; in the ideal trader, the conscientiousness creates a confidence in your own ability to take risks.
Traits that might ruin your portfolio
Anxiety
Worrying about your investments every minute of every day won't get you anywhere.
Though anxiety is common for traders, because their money is at stake, it's important to remember that you walked into this market with a good head on your shoulders. You made your decision for a reason; now you have to stick to it and see it through.
Imagination
While an imagination is good in a lot of senses, be careful to rein in yours while you're trading. Instead of hoping for the best outcome and imagining the best-case scenario, take a look at the facts; those are what will make you money, not a hopeful outlook on potential riches.
Trust
While you've got to trust your investment, and your investor, if you've got one (the two of you are a team, after all), don't always go after the best deal in the stock market.
This is a winner's game, and there are people who are trying to take your money who haven't done their research — or who have, and are trying to cheat the system. So trust your gut and go with something that seems logical to you, if it isn't hyped up by an advertising team.
This opinion article was written by an independent writer. The opinions and views expressed herein are those of the author and are not necessarily intended to reflect those of DigitalJournal.com
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