A recent article in Advisor Perspectivesoffers the following suggestions for how investors can create emotional balance to support their decision-making process:
- Avoid constantly checking your portfolio: Stock prices will fluctuate, the article notes, “but that doesn’t mean the long-term value of the company has changed.” Because stocks are held by different investors with a range of time horizons and risk preferences, their prices can shift for a variety of reasons.
- Ignore the media: “Business television encourages investors to view the stock market as a game. If you play along, you’re at risk of nullifying all the research you’ve done as your time horizon dwindles from years to minutes,” the article asserts.
- Be an investor, not a trader: If you approach the market as an investor rather than a trader, your time horizon should be long-term. That said, that article emphasizes the importance of the analytical process. Being an investor means viewing all news about a company and how it impacts the value of the business while at the same time filtering out the “noise of the everyday news dump.”