Don't Let Emotion Drive Investment Decisions

Once you have developed a sound investment and financial plan, you have already gone through the process of understanding the stock markets' historical patterns, setting realistic investment goals, and crafting a strategy that takes stock market cycles into accounts. Smart investing means you draft your investment plans and stick with your investment strategies, including your carefully thought out asset allocation strategy. When you are investing smart,  you don't let your emotion dictate what you are going to do in the stock market.

Naturally, whenever the stock market takes a nose dive, investors are jittery about their investments. This is smart investing to be thinking about your investments no matter what the stock market does - in good times and bad times. However, many investors tend to want to pull out of the stock market when the stock market is doing bad and their investments are down. This is not smart investing. Smart investing means no matter what the market does and what happens to your investments, you are still logical about your investment strategies.

What to do if your investments are down and you don't want to let your emotion dictate your investment decisions?

If you want to invest in a smart way, you should first go back to your investment and financial plans.

• Have your long term goals changed?

• Have the investing and stock market environment changed?

• Has your risk tolerance level changed?

• Has your time horizon changed?

• and so on...

Smart investing means you examine all the variables that drove your investment and financial plan in the first place. If any of the investment and financial variables have changed, then you will need to modify your financial plan and hence your investment decisions.

When you embark on investing smart in the stock market, you should be aware of the risks associated with the stock market investing. If your investments are down because of a normal stock market cycle, then you should have nothing to worry about. However, if your investments are down because there is a fundamental change in your mutual funds such as all the top mutual fund managers who manage your mutual funds have left the company or the interest rates have shot up, etc, then you have reasons to worry and change your investment decisions. In this case, changing your investment strategies and asset allocation strategies would be smart investing.