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Beginner Stock Market Investing - How to Use and Control Your Emotions to Better Invest

By Autumn Lockwood

Republish: EasyPublish™
Published: 11Jan2010
Word count: 637
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If you've ever invested in the stock market, then you probably know that the stock market is highly dependent upon the emotional reactions of its investors. But did you know that emotions are the reason that most investors don't make the kind of money they should? That's right, by learning how to control your emotions you can significantly impact the success you have in the stock market. Here are seven tips you can use to help take control of your emotions when investing.

1) Create an Investment Plan and Document It

Writing down and documenting your investment plan is proven to help keep you focused and on track. In order to accomplish what you want to with your investing, your plan should include investment goals, any specific portfolio objectives and a specific time frame to achieve them. You should revisit your plan regularly to help keep you on track and help prevent short term events from distracting you from your investment goals.

2) Do Contingency Planning

Always think through all of the different scenarios that could happen when it comes to your investment plan. Visualize and write out all of the positive and negative situations that could happen to your investments and create a plan for how you'll respond. Think of it as an emergency plan so you're always prepared no matter what happens. By doing this easy exercise, you can dramatically decrease or stop your emotional reaction to a situation because you'll have had to think it through in advance.

3) Focus on Value

If you want to decrease the chance of your emotions running rampant, focus your efforts on value investing. By focusing on value investing, you'll help to steer clear of the herd and avoid getting sucked into the news of the next big "winner.Value investing is an effective way to to help overcome the emotional roller coaster ride so you can focus on investing.

4) Set Limits and Stick to Them

Setting limits on your investments can significantly decrease your stress level and eliminate your emotional reaction to market news. By including limits for both selling and buying, you'll make more informed decisions than other emotionally distraught investors. This requires advance planning and discipline to not only create your buy and hold prices but also to initiate them when the market fluctuates. This disciplined action of buying and selling using pre-set limits will help to minimize your potential losses and insulate you from making bad decisions based upon emotion.

5) Invest on a Regular Basis

By investing regularly, you can create an investing routine where you make decisions based upon your goals rather than outside influences. This helps to eliminate the need that many inexperienced investors have to "follow the herd" and overreact. By using your plan and investing regularly based upon your specific goals, it will also help to better insulate you from market volatility.

6) Set a Limit on the Number of Transactions

Often times, the more transactions you make the more likely you are to fall victim to the emotions of the market and lose sight of your long term goals. The more transactions you make that are short term, the more random your decisions become and the greater the risk. By limiting your transactions you can decrease your costs and focus your energy on the long term trends.

7) Evaluate and Learn from Your Mistakes

Anytime you make any type of mistake, take time to consider what went wrong. Then write down this information and figure out how you can use it to your advantage next time. This one easy technique can help make your investing even more profitable because you'll avoid making the same mistake twice.

With these 7 tips you'll be able to map out your investment goals and keep your emotions in check so you can make your investment portfolio even more profitable.

Autumn Lockwood is a writer for YourPictureFrames.com and loves photography, hiking and investing. Your Picture Frames offers a large selection of quality picture frames that you won't find anywhere else. Check out our selection of beautiful jeweled frames and exquisite wood photo frames.

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