Emotional investing

#1.
Don’t let the range of options influence you

When presented with 2 options — an investment that will make you money 9 years in 10, or one where you’ll make a loss once every 10 years, people tend to choose the first option, even though both offer the same return on your money.

#2.
Don’t just stick with the status quo

If you’ve still got the same investments because you’ve always had them, review your portfolio and check if your investments are still meeting your goals. Are they well spread across different asset types, or do you need to diversify more? Has your risk appetite changed? How close are you to spending the money?

#3.
Don’t follow the crowd

Following what others are doing, rather than making your own decisions, can mean you risk losing money if the investment fails. Your investment is more likely to do well if you buy when everyone else is selling (driving prices lower) and sell when everyone else is buying (driving prices higher).

#4.
Don’t let the name of an investment sway you

For example, a super scheme changed the title of one of its funds from “Junk Bonds” to “High-Yield Bonds”. The investments in the fund didn’t change, but more people invested in it. 

#5.
Avoid information overload when learning how to invest

While it’s a good idea to research before investing, too much information can also be overwhelming. If you’re stuck, focus on 2 or 3 good options, and divide your money equally.

#6.
Don’t get emotionally attached

People often keep investments they have inherited or been given because they feel disloyal selling them. But, the person who gave you the investments will likely be happy you’ve moved your money into investments that suit you better.

#7.
Don’t wait for the right time to sell

You may be worried about selling an investment because you’ll get less than what you paid. This can lead to sticking with a poor investment for years. Having a clear goal will help you decide if the investment is still right for you, regardless of what you paid. 

#8.
Consider your whole portfolio

Let’s say you’ve put some of your savings in shares or a share fund, and the rest in bonds. When you check how well you’re doing, don’t focus on each type of investment — look at how your whole investment portfolio is performing.