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Three ways to keep your emotions out of your investment decisions and profit

by , 21 October 2015

Emotions don't have a place in investing. They lead you to make the wrong decisions, which inevitably means your portfolio loses money.

So how can you remove emotions out of your investment decisions?

Read on to find out…

Emotions remover #1: Take a structured approach to investing

When it comes to buying shares, you need to take a structured approach.

One way to do this is to invest your portfolio in different types of shares. For instance, invest:

  • 50% of your portfolio in solid blue chips stocks, paying dividends;
  • 40% of your portfolio in growth shares; and
  • 10% of your portfolio in more speculative shares like penny stocks.

Then periodically rebalance your portfolio. This forces you to sell high and buy low, and keeps emotions at bay. It also minimises the number of transactions you make, which only benefits your stock broker.

Emotions remover #2: Buy when others are selling

Always have a list of shares you’d like to buy but are currently trading at a higher price than you want to pay. You can buy into these on any market dips.

This can be hard to do. When there is panic, it’s hard to go against this and buy, but this has great potential to make you money.

Emotions remover #3: Use trailing stop losses

Trailing stop losses are an effective way of removing emotions from your selling decisions. They protect your capital and control your risk.

Trailing stop losses allow you to keep calm whatever happens and you’ll know exactly when to sell.

The best way to remove emotions from your investing decisions and to yield the benefits is to keep things simple and stick to easy to follow strategies.
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Three ways to keep your emotions out of your investment decisions and profit
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