We often make purchases based on how we think theyll make us feel.  Should you to buy and sell stock investments based on how you feel about the company?  Well, it depends on the situtation, but we do love what the Wall Street Journal  has to say about emotional stock investing:

Individuals and pros perform better when they acknowledge that investing is inherently emotionally charged and when they understand how emotions affect their behavior.

Here are 5 tips to ensure that your emotions dont wrongly cloud your stock investing judgement.

1. Just because youre a happy customer doesnt mean a stock is a good investment idea.

It is natural for us to want to invest in companies that we know, like, and perhaps even are a customer.  Most people probably have had an interaction with an Apple or Microsoft product recently, but just because you are a customer and love the company doesnt mean it is necessarily a good stock to invest in.   This is where our Market Power Indicator app can help you with business-related news and metrics like the safety score to help understand the company you love from a business & investing perspective.

2. Just because you think a company is boring doesnt mean you should avoid investing.

This is a common complaint with our safety score rating system that many of the companies we highly rate for excellent long-term investments are boring.  At the moment, our top rated sectors (the most safe for long term investments) are basic materials, industrial goods, and utilities.  No Google, no fashion labels, no Apple.  These sectors house companies like tire makers and railroad operators.  These may seem rather boring and uninteresting, but if your goals are to have a strong investment, then you have to accept that sometimes boring companies are great for your portfolio they produce the goods well always need and use, which can be a bit boring.

3. Differentiate between ethical dilemmas and emotional feelings.

We dont want to overlook the fact that your emotions do  matter, and if you truly dont want to invest in a company, dont.  But, lets do a gut check are you avoiding a good investment because it is a boring company, or is it because you have an ethical dilemma with the company?  Maybe you think that their diversity is lacking, that they mistreat their employees, operate their business with unscrupulous practices, or just think their product is harming the planet?  If your dilemma with investing is an ethical one, then dont make the investment simply put.  We think that the market is big enough that you can easily avoid sectors that can bring up some ethical misalignment and still good about your portfolio.

4. Dont over-react to overall market swings.

One of the easiest and most frequent emotional investing mistakes is reacting to huge market swings and the markets swings have gotten bigger over the years.  Its easy to fall into this trap: newspapers sell lots of newspapers reporting on big market swings, triggering fear or excitement and pushing the swings higher/lower.  Dont fall for it; you shouldnt buy or sell a stock just because of what the price is today buy or sell based on where you think the price will be 1, 5, or maybe in 20 years for now.

5. Know your goals.

The last but most important tip for today is to know what your stock investment goals are.  For example, if your plans are to build a retirement fund and youre in your early 30s, you should be buying and selling with a very long range outlook.  If youre hoping to reduce your high risk stock portfolio and cash out in the next 5-10 years, then using something like our safety score ratings to move into low risk territory might be a good way to align your investment decisions with your goals.  But you cant make a good stock investment decision if you dont know what your goals are. And thats not emotions thats a simple fact.