Investing with a clear mind: 3 tips to keep you in check

Mental health and investing don’t necessarily go hand in hand and the state of the former significantly affects the results of the latter.

| 3 min read

I’d like to take this opportunity to write about a very topical and important issue - mental health and investing. The two don’t necessarily go hand in hand and the state of the former significantly affects the results of the latter.

Investing our hard-earned cash can be a very emotionally charged process. Whether you have worked for someone else, built a business of your own or maybe inherited your wealth, we all have investment decisions to make. Whatever your route to wealth and whatever the amount, we all have our mental challenges when it comes to making decisions in often volatile and fast-moving markets.

To a point, this is healthy and just a part of human nature. But how do you keep your overall financial mental health in check? How do you keep your mind clear and balanced to make good decisions? How do you evaluate your decisions objectively? It’s key to know that sometimes a good decision process can have a bad investing outcome and a bad decision process can end profitably.

Essentially, sometimes there is a degree of luck involved. Our job as investors is to make good decisions that lead to good outcomes, consistently.

Thankfully we now have an increasing focus on mental health across both our professional and personal lives. This year has been testing for all of us and with the world as uncertain as it is today, the state of your financial affairs has never been more important.

I’d like to highlight three tips I think every investor can benefit from to help maintain a clear focus when it comes to investment decision making.

1. Take control?

This seems simple but can actually be quite a complex question. Do you feel that you are in control of your investments? Do you know what investments you have and why? Do you understand what factors might be good for them and bad? Notice I’m not asking if you have all the answers- nobody does and we need to be realistic about that. But if you feel in control and have a good understanding of where you are positioned, this can give you peace of mind and help your overall stress levels.

2. Look at the bigger picture

A lot of people’s lives have changed in 2020, whether it be jobs, relationships, finances or health. Do you think you are taking the due level of care over your investment decisions? Danger signs here are the ‘head in the sand’ effect, looking for someone to blame, frequent buying and selling and overuse of the word ‘hope’. If this is you, you might benefit from taking a step back and gaining some perspective.

3. Ignore the noise

We live in an era of 24-hour news feeds and a virtually limitless amount of market commentary and data. You don’t have to look very hard to find a plethora of different data points that can allow you to have a very skewed or one-sided view of the world. Learning to differentiate between what is noise and what is tangible, actionable information is a skill that every investor develops over time. Often a major determinant of your investing success is your ability to take in a lot of information and filter out the excess that doesn’t add any value.

Nothing on this website should be construed as personal advice based on your circumstances. No news or research item is a personal recommendation to deal.

Investing with a clear mind: 3 tips to keep you in check

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