Title: How to Avoid Emotional Investing
Headings: How to Avoid Emotional Investing
How to Avoid Emotional Investing
Key Takeaways
Performance Chasing Can Cost You
Investor Behavior
Bull vs. Bear Markets
Bad Timing
Time-Tested Theory
Strategies to Take the Emotion Out of Investing
$6.2 Trillion
Frequently Asked Questions
Why are emotions so important to market psychology?
How can one measure the level of fear or greed in the stock market?
What are some trading strategies to keep emotions in check?
The Bottom Line

Content: Bad Timing
Emotional investing is often an exercise in bad market timing. Following the media can be a good way to detect when bull or bear markets are evolving because the daily stock market reports feed off the activity occurring through the day, which can at times create a buzz for investors. However, media reports can also be outdated, short-lived, or even non-sensical and based on rumors. At the end of the day, individual investors are accountable for their own trade decisions and therefore must be cautious when seeking to time market opportunities based on the latest headlines. Using rational and realistic thinking to understand when an investment may be in a development cycle is the key to evaluating interesting opportunities and resisting bad investing ideas. Reacting to the latest breaking news is probably a sign that decisions are being driven by emotion rather than rational thinking. Time-Tested Theory
The notion that many market participants buy at the top and sell at the bottom has been proven by historical money flow analysis. Money flow analysis looks at the net flow of funds for mutual funds and often shows that, when markets are hitting peaks or valleys, buying or selling are at their highest. Market anomalies like a crisis can be useful time periods for observation. During the financial crisis of 2007–2008, investors withdrew money from the market and money flows to mutual funds turned negative.