Do you identify with the stocks that you choose to invest in? Doing so can be detrimental to your financial health. And if you think that you don’t, you might want to think again. That’s because many people feel an emotional connection with their stock investments and don’t even realize it.
Questions to Ask Yourself
To find out if you do have an emotional investment in your financial investments, ask yourself the following questions:
- Have I ever felt proud because a stock that I took a big risk on succeeded? Everyone told you that it was a mistake to invest in that particular stock, and then it did well anyway. It only makes sense to feel proud of that, right? Wrong. Your sense of pride shouldn’t be dependent on showing off your risk taking successes to others. Being pleased or happy about a success like this makes sense. Being proud means that your emotions are probably tied up in owning stocks.
- Does my mood change when I find out that stocks have gone up or decreased? If you regularly check the stock market and your mood is dependent on what the numbers say, you’re too emotionally involved in what’s going on with your investments. Yes, you need to monitor your stocks to make sure that you’re making smart investments. However, your daily mood shouldn’t be altered dramatically by the information. If you’re taking only smart risks that you can afford to take, you can feel financially secure in spite of ups and downs in the stock market.
- Have I ever said “I love” a particular stock? If you have strong feelings like love and hate for your individual stocks then you are too emotionally invested in them.
- Do I speak about the stocks as though they have a personality or life of their own? For example, do you say things like “Google has been good to me this year”. The stock itself can’t do anything to you, and if you speak in terms that indicate that it can, you’ve become too emotionally involved with those stocks.
- Do I consider yourself a company owner because of your stock? For example, do you feel like you are an owner of IBM or Apple because of your stocks? If you feel this type of deep connection to the company of the stock, you may be too emotionally invested to make smart choices about your investments.
The Risk of Emotionally Investing in Stocks
If you feel emotionally tied to your stocks, you may make poor financial decisions. You may be unable to give up a stock that is failing because you’re emotionally invested in keeping it. Alternatively, you may be unable to invest in smarter stocks because you don’t feel the same emotional bond with them.
Signs of this include:
- You feel like you can’t let go of a stock because you love it. If your decision is based on a feeling about the stock or company and not by weighing the pros and cons of the financial facts, you are very likely to make poor, rash decisions.
- You feel like you can’t let go of a stock because you enjoy being an “owner” of that particular company. Many people really feel like the identity of who they are is tied up in the types of stocks that they choose to invest in. They don’t want to let go of companies that they feel a bond with because they feel like it takes something away from their own identity. They may therefore hang on to a flailing company’s stocks because they wish in their hearts that the company would succeed and not because they genuinely believe that the company will do better in the near future.
- You feel depressed that your stock isn’t doing well because your self-esteem is tied to the ups and downs of the stock market. If you are someone who takes pride in the fact that a stock you took a risk on is doing well then you may have trouble letting that stock go when it begins to falter in the market.
What To Do if You’re Emotionally Tied to Your Stocks
You can’t make smart investment choices if they’re driven by your emotions. If you’re emotionally invested in your stocks, then the following tips can help:
- Work through your money issues with a psychologist. Dealing with the underlying core issues of why your self-esteem is intricately linked with your finances will resolve a lot of these issues.
- Get investment advice from a professional. A broker or other expert third party can help you to more clearly see what choices you should be making about your investments.
- Alter your language. Pay attention for signs that you’re talking about your stocks as though you love them. Change your language and you’ll start to change your attitude about your investments.
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