Monday, October 20, 2014

Another Great "Coffee Break" Post from Jim Parker

Interesting Links from the Web

When markets become volatile, as we have seen recently, emotions can come into play. How should you deal with this?
In this week’s Coffee Break, we look at the link between emotions and our finances and how we can re-frame the feelings to get better outcomes.

One response to market volatility is to attempt to forecast how markets might evolve. Can we tactically anticipate what might happen to stocks, bonds, currencies and commodities? The evidence suggests not. As an alternative, this writer suggests forecasting your emotions, instead of the markets.

We can’t forecast markets. But we can forecast how we might react to volatility.

Our fear-or-flight stress response was a life saver when we were on the run from sabre-toothed tigers. But it’s not that helpful to us as investors when markets are volatile. This author suggests we draw up a set of rules to guide investment decisions and develop the discipline to stick to them.

The bad news about emotions is they can wreck your investment experience. The good news is they are manageable.

Negative emotions can often be more intense than their positive counterparts. And when mixed with money, they can really cause problems. What to do about this? This writer says feelings like anxiety, regret and jealousy are all manageable if we tackle them head on and reframe the problem.

Negative emotions can play havoc with our finances. Here’s how to deal with eight nasty feelings.