8 Practical Way For Stock Investors To Be Emotionally Intelligent
5 April 2021
Humans Are Emotional Creatures, Do You Agree?
If the answer is yes, I think you have felt it before.
Emotions do motivate people’s actions.
In general, emotions are based on instinct. They can be useful and at times, dangerous.
Emotions can be useful if they allow us to tap on our subconscious to make better decisions (some people call that gut feel).
Emotions can be dangerous if it forces us to react and act without thinking – and we turn out to be wrong.
In this article, I would like to share some practical tips on how we can be a more emotionally intelligent investor.
Let’s Start by Understanding Why Humans Are Emotional
Scientists have discovered that emotions are generally caused by our own thoughts. That means that two people in the same situation could feel different emotions if they have different thoughts.
Think about it.
That means that emotions generally come from our thoughts.
Yes, it’s normal and healthy to have emotions, but heightened emotions can be harmful.
Why would we have heightened emotions?
Heightened emotions can be caused by many factors – including, diet, stress, genetics, or even health conditions such as depression.
Did You Also Know That Lack of Sleep Can Also Affect Our Emotional Balance?
Scientific studies have also shown that getting less sleep may cause our emotions to be out of tune.
Life can be hard.
Everyone has their own problems.
Knowing how to control our emotions is all about having emotional balance.
Not going onto the extreme.
But trying to have that balance.
Based on this website, the wise mind is the balance between emotion and logic.
The wise mind is a place where we are more balanced.
That wise mind is where we neither suppress how we feel or let emotions control how we act.
The focus is on allowing us to embrace our emotions while having the self-control and clarity to take charge and respond wisely.
Why Stock Investors Need to Learn to Have Good Emotional Control
For investors, research has proven that having good emotional intelligence will help investors to be better at decision-making.
Having a calm, rational mind will help us to be more balanced and be more emotionally intelligent.
I am sure by now you know that investing is not a simple endeavor.
It is both art and science.
A mind that can be rattled easily due to an emotional imbalance will not make good decisions.
“Emotions are a far more important driver of success than IQ. What made Warren Buffett such a great investor was not just superior intellect, but emotional fortitude to stay true to his strategy during deep drawdowns.” – Michael Batnick, Director of Research at Ritholtz Wealth Management
Another reason why controlling our emotions is important, is because it is true that patience is required to make the big money in investing.
How can we be patient if our emotions are not balanced?
With good emotional management, we can have a higher chance to control ourselves to have the right patience of not selling our stock if they still have a bright future – while not anchoring to losing positions – if they have a bad future.
The ones who have gotten rich – extremely rich from investing are those who tend to have held their stakes for decades.
Peter Lim held his stakes in Wilmar for a long time before he exited and got his Billion dollar. He invests in a business-like way and he did not try to time the market on when to enter and exit his Wilmar investment.
8 Practical Way For You Be More Emotionally Intelligent
I am a big fan of learning mental models and adding them to my repertoire of what I call “tools” to manage my emotions and be a better investor.
Here are 8 practical ways I personally use to be more emotionally intelligent:
1. Asking myself what is the dumb thing I could do here, and how do I avoid it? (Instead of asking myself what is the smart thing I could do here) (learned this from Charlie & Warren Buffett).
2. Learn to trust ourselves and master the skill of what we call non-striving (something I learned from a meditation teacher called Jon Kabat-Zinn).
Non-striving basically means accept things as it is instead of being too focused on the end result. And surprisingly, often when we do this, we might be getting better results – due to our clearer and more rational head that is not bogged down by stress.
3. Learn to have a beginner’s mind (also something I learned from Jon Kabar-Zinn). This means that we should not assume we know everything, because if we do, we will often be closed off and not see things as they are — and instead we only see things as we think it is.
4. Being mindful that we are impatient and understanding that “we cannot push the river”. Some things just take time.
As Buffett said before, we cannot get a baby in one month by making nine women pregnant. Investing is a long-term endeavor.
A thesis takes time to play out. And the patience to wait for our thesis to play out is what separates the amateur investor from the greats.
5. Be mindful that we should have a wise relationship with life by paying attention to the present moment and being non-judgemental with what is happening to us. Take things as it is – not as we want it to be.
6. Do not be attached to money. Yes, money is important and it may help our happiness. But money is not everything, a study found that people who equated to money and success were not as happy as those who did not.
7. Meditate regularly. Meditation has been proven scientifically to help us control our emotions better.
Personally, as a part of my routine, I usually meditate 2 times daily (once in the morning and another in the evening).
Meditation has helped me deal with life stresses better – and it has helped me make better investment decisions too.
8. Laugh it off.
Another personal tool that I use is simply to have more sense of humor. When there is something that is bothering me, I will just laugh it off.
Life is too precious to be bogged down by emotional and small things. Don’t you think?
To control our emotions better, simply exercise more. In general, exercise can promote emotional balance.
There is a study back in 2017 that showed that aerobic exercise (like jogging) had a therapeutic effect on regulating emotions.
I hope that from this article, you will understand why having good emotional management as a stock investor is crucial. And more importantly, some of the practical ways that can help us control our emotions better.
Because investing is a game where quite often, inaction beats action.
To win in the game of investing, being emotionally intelligent is necessary.
So that we can have the right patience – which is one of the key ingredients for investing genius.
The information provided is for educational and general information purposes only and is not intended to be personalized investment or financial advice. We make no promises as to the accuracy or usefulness of the information we present. Important: Please read our full disclaimer.
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Chris Lee Susanto
Founder and blogger of the value investing x business-like stock investing blog Re-ThinkWealth.com.
Chris is a big proponent of business-like stock investing. He invests in companies where there is value to be found, be it a turnaround, depressed, value, or quality growth company (compounders). He either buys the stock outright or he profits through selling put or selling call options – or buying call options (buying and selling options are especially dangerous for those who do not know how to properly execute it).
Some of the places where Chris has been invited to speak or have added value as a mentor or writer includes Singapore Polytechnic, SMU Institute of Innovation and Entrepreneurship (IIE), Dollars and Sense, The New Savvy, Value Walk Blog, Investment Moats, NUS Tembusu College, NUS Investment Society, CGS-CIMB Singapore, Singapore Financial Conference by NTU IIC, The Financial Coconut Podcast, Money FM 89.3 and Internationally in Myanmar.
Being a full-time investor, Chris knows that he did not beat the S&P 500 return so far (as of the time of this writing) by listening to stock tips. So, when he teaches, he also doesn’t believe in giving stock tips as it is not sustainable for you in the long run. As of now, Chris’s focus is on setting up a MAS Licensed Fund in the future with the goal to beat the market over the long-run. Feel free to join his free investment telegram channel here.
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