The Emotional Investor (Part 1)

How do you feel about your investments?

Source: 3ammagazine

On one level, that’s a foolish question. Investments aren’t supposed to be objects of affection. It’s one of the most basic errors to fall in love with a stock. You should never love something that doesn’t love you back. It keeps you from selling when you should; it makes you focus on just one small part of a much larger financial picture—like obsessing on the Mona Lisa’s hands.

But on another level, it’s a very important question. After all, how we manage our assets makes a huge difference to our financial future. And one key to managing our investments is managing our emotions. We’re emotional creatures. If it’s a mistake to be emotionally attached to our financial assets, it’s an equal and opposite error to deny our emotional makeup.

Source: Jeremy P. Gray Photography All rights reserved

It’s a paradox that the best investors care passionately about their craft. They’re fascinated by balance sheets, credit metrics, and quantitative screens. The covariance of different industries and financial structures is an endless source of fascination. At the same time, they can be cold and calculating when it comes to individual assets. When a stock has served its purpose, it’s time to get rid of it—no regrets, no tears. A particular company may be a great investment, but if it represents more than 10% of your portfolio, it’s an imprudently large bet. It’s time to trim it back. As any gambler knows, if you let your stake ride long enough, eventually the house collects it.

Your portfolio should be structured so that you can sleep at night. As Peter Lynch once said, everyone has the brains to make money in stocks. Not everyone has the stomach.

Douglas R. Tengdin, CFA
Chief Investment Officer
Phone: 603-224-1350
Leave a comment if you have any questions—I read them all!

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By | 2017-07-17T12:23:04+00:00 February 11th, 2015|Global Market Update|0 Comments

About the Author:

Mr. Tengdin is the Chief Investment Officer at Charter Trust Company and author of “The Global Market Update”. The audio version of each post can be heard on radio stations throughout New England every weekday. Mr. Tengdin graduated from Dartmouth College, Magna Cum Laude. He received his Master of Arts from Trinity Divinity School, Magna Cum Laude and received his Chartered Financial Analyst (CFA) designation in 1992. Mr. Tengdin has been managing investment portfolios for over 30 years, working for Bank of Boston, State Street Global Advisors, Citibank – Tunisia, and Banknorth Group. Throughout his career, Mr. Tengdin has emphasized helping clients manage their financial risks in difficult environments where they can profit from investing in diverse assets in diverse settings. - Leave a comment if you have any questions—I read them all! - And Follow me on Twitter @GlobalMarketUpd

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