Investing, as you’ll soon come to know, can be extremely stressful. You’ll see your account start to get hit with losses back and forth or a winning position turn sharply against you. And while a lot of people think that they can remain rational and emotionless when it comes to investing, greed and fear of missing out still manage to crawl out into the surface and impede their ability to make logical decisions. Here are four ways to reduce your investing stress:
Make a Plan
You don’t have to reinvent the wheel when it comes to making a solid investment plan. There are various strategies out there that you can copy from. What matters is actually having a plan that helps you organize and systematically choose your investments. Many people say they are in it for the long haul, and yet they fail to establish a plan for possible sharp market swings and economic turmoil. Rather than panic when your investments start to drop, you’ll have a plan in place to keep you from making any irrational decisions.
Be Okay with Staying on the Sidelines
Acknowledge the fact that cash is also a valid investment position. Liquidating your assets into cash during volatile times reduces stress that comes from being overextended in the financial market. A general rule of thumb is to maintain a cash reserve that can cover your expenses for at least an entire year. If not, make sure you have enough cash on your savings or checking account that can float you for at least up to six months.
Identify Your Purpose
If you are investing to pay for rent, you will be stressing out at each price tick that’s on the opposite direction of your position. On the other hand, if you are investing money that you can afford to lose to help build your retirement nest, you can remain calm and at peace when you lose a position since you know it’s just one of the many investments you’ll make in the long term that will affect your bottom line. Studies show that investors who have a long-term investment plan and have the right financial intentions perform much better than those who fail to plan and those who are day trading for their main income source.
Acknowledge the Uncertainty
No matter how much planning and research you do and how much counseling you get, investing is never 100 percent certain. And although long-term investing tends to be more predictable than shorter-term strategies, like day trading and scalping, you have to genuinely accept the fact that there are uncontrollable events and factors that you cannot foresee. Stick to fundamental investing principles including buying low when stocks are cheap and selling when they are in great demand.
There is simply no room for emotions in investing. It clouds your judgment and stresses you over time. Instead, stick with sound investment strategies and habits that help you establish structure and discipline when handpicking stocks or any other financial asset for that matter.
–Davenport Laroche, Headquartered in Hong Kong