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How To Practice Less Emotional Investing

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Biologically, our brains run through our emotions and decision-making in the same area. This doesn’t always leave us in a good place when it comes to money. Read on to learn how to improve your emotional relationship to money and practice less emotional investing.

How To Practice Less Emotional Investing

You can listen to any of our podcast episodes to understand that money has a huge impact on our emotions. It’s why we ask our guests about their money story and their money mantra: our emotions and childhood experiences have a heavy impact on our adult behavior, and our mindset can change how these experiences manifest in us. Whether it be general financial anxiety, financial avoidance, or emotional investing, chances are you may also have some experience with mixing your money with your emotions.

How To Practice Less Emotional Investing

Why Our Emotions Become Involved In Our Money

Psychologically, we make most of our decisions from our limbic brain, which is involved in decision-making and human behavior. If it feels like emotions consistently cloud your decisions, there is nothing wrong with you. Biologically, this is how your brain is built.

As women of color, it can feel like society is gaslighting us, or trying to make us feel like we’re crazy. From a more intimate level, the relationship between race and class can leave us first generation, woman of color wealth-builders with a deep scarcity mindset. We love this piece from the Luz Collective, a digital storytelling platform and community for Latinas, on generational trauma in Latina finances.

How to Know Your Emotions Are Too Involved

According to a 2016 study by Northwestern Mutual, 85% of Americans reported feeling some level of financial anxiety. Financial anxiety was common in 2016, pre-global pandemic and high unemployment rates. After COVID-19, we can only assume how much more widespread and loud these money anxieties have been running. Here are some common signs of financial anxiety we have heard among the Yo Quiero Dinero Podcast guests:

  • Swiping your credit card mindlessly
  • Avoiding taxes
  • Overspending
  • Engaging in retail therapy

If you’ve experienced any of the above, your emotions might be too tied into your money!

And if you’re an investor, emotional investing is a thing. According to a 2019 study from Ally Bank, “over four in five Americans say investing is like riding an emotional rollercoaster.” Take last March when the Dow plummeted 20.3% from its February 9th high. People who were emotionally investing maybe:

  • Sold off some (or a lot!) of their positions
  • Stopped investing temporarily
  • Pivoted to “safer” investment vehicles, like bonds

If you did any of the above back in March 2020 (or if you got into the GAMESTONK craze), you might have been emotionally investing, meaning you were making investing decisions from a place of high emotions.

Here are some tangible steps to change this rollercoaster dynamic.

Steps to Take Your Emotions Out Of Your Money: Personal Level

The emotional connection to your decision-making is biological. Even then, we can take steps towards stabilizing the intensity of our emotions in processes that involve decision-making with money.

The trick is in training your brain to make these decisions faster, and trust that your emotions are influenced by a truthful perspective on your reality. But the even bigger trick is to learn to identify when people, companies, the media, or the market are manipulating your emotions to elicit a specific reaction or decision from you. Or when your experiences—particularly those at a young age—have influenced you to feel a particular way.

Practice Some Financial Self Care

Self care is about doing the things that we know benefit us in the long run; plot twist, they don’t always feel the best initially. If money gives you anxiety, chances are some of these things won’t feel great at first. But identifying the root of our money anxieties is one step towards separating emotions from our money. And part of this also involves basic financial planning.

Steps to Take Your Emotions Out Of Your Money: Investment Strategy

As an investor, addressing your personal financial anxieties will improve your investment strategy. In short, more active trading is tied to overconfidence, and this has been shown to return less at the annual level. Sustainable active traders are those who have developed a firm strategy around their investment practices; check out episode 78 with Teri Ijeoma for an example! Here are some steps to practice less emotional investing:

1. Consume a little less financial media

Any news channel you tuned to in mid-March 2020 mentioned some narrative around the market crash. Even now, financial media channels position all of their news through a lens of immediacy or crisis. This is their job. Turn down some of the noise to make more room for your own voice.

2. Set SMART Goals for your investments

We’re talking clear, achievable, step-by-step plans that you won’t detract from in the case of a “market crisis.” These are goals that you are drafting up a specific timeline for and that you will return to time and time again.

3. Learn how to make investment decisions

The key is to have the information you need to make your own decisions, versus letting others (like big-time financial pundits) influence your investing choices. Check out this piece on how to research individual stocks or this piece on understanding the differences between index funds and ETFs. Once you have this information, you will develop your own plan (ie when to invest, how much to invest, etc.) and stick to it when the rollercoaster gets too rocky.

4. Maintain a long-term view on performance

A short-term view back in March 2020 would have resulted in you seeing a 20% loss in the span of a month. A long-term view, however, would have shown this as a natural market correction and as an opportunity for heavy market upswing. Today, we have surpassed the all-time market high in early February 2020.

Dollar Cost Averaging Vs. Diversification

There are two popular approaches to investing that help take the emotions out of investing.

Dollar Cost Averaging is a strategy that involves you spacing out an equal amount of money over a set period of time. For example, let’s say you have a goal to max out your Roth IRA in one year. Under the dollar cost averaging method, you would invest $500 once a month throughout the year. You don’t purchase based on securities, but rather dollar amount. Doesn’t matter if the market conditions are going upward or downward.

Diversification is a strategy that involves buying an array, or diversity, of assets, rather than putting “all your eggs into one basket.” You can diversify your portfolio via different companies, different industries, different geographies, or different types of investment vehicles.

The Bottom Line

In your pursuit of money, make sure you are not making yourself miserable. Wealth-building should grant you security and peace of mind, not stress. Less emotional investing, less money anxiety, and more wealth-building.


Download our FREE 14-page guide covering all the topics you need to start making your dinero moves. Visit here. From money mindset, to budget basics, we’ve got you covered.

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Meet Jannese

Jannese Torres is a award-winning Latina Money Expert, Educator, Speaker, Writer and Business Coach. She became an accidental entrepreneur after a job loss led her to create a successful Latin food blog, Delish D’Lites. Now, she helps her clients and listeners build successful online businesses that allow them to pursue financial independence and freedom.

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