The concept of mindfulness has gotten a lot of attention in recent years. When you practice mindfulness, you’re highly aware of your thoughts and emotions – but you don’t act on them. Instead, your decisions are based on cognitive skills and a rational perspective. And this approach can be useful in investing.
Being mindful helps you avoid emotions such as fear and greed when you make investment choices. Fear can lead you to selling investments just because their price has dropped sharply. And greed can cause you to keep chasing after investments whose price may have gone too high and are ready for a fall.
You can keep fear and greed out of your decisions by knowing your investments thoroughly, so you’re not shocked by their performance. Also, rebalance your portfolio periodically to match your intended investment mix – this type of discipline will help keep you from pursuing inappropriate investments that may be outside your risk tolerance.
It’s not always easy to be a mindful investor and to avoid letting emotions drive your decisions – but it’s well worth the effort.
If you have any questions please contact me at 980-859-2549 or by e-mail at Brandon.Monette@edwardjones.com
This article was written by Edward Jones for use by your local Edward Jones Financial Advisor.