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The Cordant Blog

How to overcome emotions and be a better investor

by Isaac Presley, CFA on February 10, 2015

*Note: This is Part 2 of a two-part series. Click here to check out Part 1, where we discussed how emotions can inhibit our ability to make wise investment decisions. To receive helpful posts like this directly to your inbox, sign up for our free newsletter!

 

Last time on the Cordant blog, we discussed how emotional responses can derail you and cause poor investment decisions. Now let’s take a look at a few systems to put in place to prevent this.

In his book Willpower, Roy Baumeister studies what he calls “the greatest human strength”—and how we can use willpower to overcome our default way of operating. Essentially, how can we override our short-term emotional response to accomplish our long-term goals?

Stop me if this sounds familiar… in the long-term you want to be more fit, so you should go for that run. But right now you just feel like plopping down on the couch and watching some TV—and often, your immediate emotional response wins out.

In investing, as with fitness, prioritizing the short-term over the long-term is not ideal.

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The cost of emotion: why you make poor investment decisions

by Isaac Presley, CFA on January 28, 2015

*Note: This is Part 1 of a two-part series. Stay tuned next time on the Cordant blog, where we’ll explore strategies for overcoming your emotions to make more advantageous investment decisions. To receive Part 2 and other helpful posts directly to your inbox, sign up for our free newsletter!

 

What if I told you that someone with brain damage is a better investor than you?

Ouch, right?

Well according to a 2005 research paper entitled “Investment Behavior and the Negative Side of Emotion,” it’s true. And it’s due to the emotional response we as humans often default to when making decisions—specifically, decision-making in the face of financial losses.

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