Investors Can Benefit from 'Mindfulness'
By: Edward Jones
Recently, we've seen an increased interest in mindfulness, although the concept itself is thousands of years old. However, there's also been some confusion about what being mindful really means. When you're mindful, you're keenly aware of your thoughts and feelings, but you don't act on them – in fact, just the opposite. With mindfulness, your decision-making is based on cognitive skills and a rational perspective, rather than emotions
Several emotions and emotion-driven tendencies are involved in investing, but two of the most common ones are fear and greed. To avoid the dangers of fear and greed, take these steps:
• Know your investments. Make sure you understand what you're investing in. When you purchase stocks, know the fundamentals, such as the quality of the product or service, the skill of the management team, the state of the industry, whether the stocks are priced fairly or overvalued, and so on.
• Maintain the appropriate asset allocation. To help fight against the emotional forces associated with investing, you'll want to employ as much guidance and structure as possible to your own investment portfolio, which means you'll want to construct the proper asset allocation – the mix of investments that's appropriate for your age, family situation, goals and risk tolerance.
• Rebalance when necessary. After you've established your initial asset allocation, you don't have to stick with it indefinitely. Changes in your life – new job, new children, new plans – may well affect your ideal asset mix over time.
• Keep investing. Ups and downs are normal features of the investment landscape, but they can certainly contribute to anxiety and fear – and, just as importantly, they can lead you to make poor choices, such as not investing for a while.
By following these suggestions, you can help yourself take a lot of the emotions out of investing, and, in the process, become a more mindful investor. To learn more about making investment choices that make sense for you, contact an Edward Jones financial advisor.
Edward Jones - Mae Luchetti