BROOK PIFER | Stone | Getty Images
Investors know they shouldn’t let emotion or impulse guide their investment decisions, but many just can’t help but find out, according to a survey on personal finance website Magnify Money.
A majority, or 58%, of the investors surveyed agreed that their portfolio performs better if emotions are ignored. However, 47% said it was difficult to keep emotions in check, the survey found.
The result is buying or selling remorse: two thirds of those surveyed said they regretted impulsive or emotionally charged investment decisions. Those most likely to take these unfortunate moves are Gen Zers (85%) and Millennials (73%).
With less experience in the market, younger investors may not know how to make decisions, said Kamaron McNair, editorial assistant at MagnifyMoney.
More from Invest in You:
Getting financial advice on social media can be tricky. How to Navigate
During the post-pandemic boom, new investors are jumping into the market
This is how you can get a grip on your financial stress
In addition, it is now easier to get into the exchange due to the various trading apps available. Combine that with the surge in investment advice on social media and this could be a recipe for disaster.
“The environment made it easier for them to make mistakes,” said McNair.
“They’re watching a TikTok to buy this stock and people are listening,” she said. “They don’t do background research on who is giving this advice.”
It’s not just emotions that interfere with decision-making, it’s alcohol. Almost a third, or 32%, of investors invested while drunk. A whopping 59% of Generation Zers surveyed admitted buying or selling an investment while drunk.
What to do when your emotions rise
Before you beat yourself up, know that it is human nature to be emotional – and there is no point in blocking your emotions, said Jacquette M. Timmons, a financial behaviorist at Sterling Investment Management, based in New York .
“Instead of trying to deny or suppress the existence of the emotion, be honest with yourself about what that emotion bubbled to the surface [is],” She said.
Once you acknowledge it, be it fear, greed, or something else, find out why you are feeling this way. Then work out the next action based on a system you should already have that appeals to the companies you want to buy, how you rate them, and when to sell or buy.
“Far too many people just measure whether they should buy or sell something based on just changes in stock prices, which have nothing to do with company performance,” said Timmons.
Instead, look beyond the daily stock price or quarterly movement to determine when you will sell, she said.
While people can’t evade emotionality, they can choose to be impulsive or not, she noted.
When faced with a desire to make an impulsive decision, not only do you get back to your system, but also look at the general impulsiveness in your life. See what the triggers for that emotion were so you can spot patterns and build some barriers.
It is also important to know if you are investing, which means you are holding assets to build wealth over the long term, or if you are trading that is buying and selling frequently.
“Part of the challenge is that people are playing the market and not sure what their role is,” said Timmons.
“That’s why they make these impulsive decisions.”
SIGN IN: Money 101 is an 8-week financial freedom learning course delivered to your inbox weekly.
CASHBOX: Almost half of Americans who sell their homes don’t plan on buying another one: Here’s what they over do instead Growing with acorns + CNBC
Disclosure: NBCUniversal and Comcast Ventures are investors in Acorns.