Investing & emotions can go hand in hand - learn how to overcome this all too common problem.

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Welcome to the EnjoyMore30s Family Finance

podcast. The only podcast dedicated to making life more

enjoyable for young families by hitting on the financial topics

that tend to weigh on us, stress us out, and distract our focus

from simply enjoying life.

Hello, and welcome to the seventh episode of the

Your Major Money Misnomers series. As always, if you like

what you're hearing, please make sure to subscribe or follow us

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leaving a review, it really really does help other young

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So last week, we discussed Long Term Disability...MORE Likely to

Happen? that covered what i actually worse than deat

financially and that is lon term disability as well as what

you needed to know about protecting yourself against it.

So really make sure to check that out if you have not

already. Today our title is Don't Worry, We Are All

Emotional Investors, where we are going to discuss why

emotions tend to play such a big unwelcomed part in investing and

what you can do to try and not have it really work to your det

iment. So as I got older, I wou d up turning into a person who

doesn't have much of a sweet too h. Some of that was just mor

of a healthy eating kind of a f cus but things like ya know cake

cupcakes, icing, I actually nev r enjoyed them really at any poi

t in my life. And that, you kno , makes me a big weirdo. Right?

o if it's something that sal y though, I'll gladly partake

o complete excess. So that brin s me at least a little bit ba

k towards normal. Anyway, despi e that, there are some notab

e exceptions when it comes o sweets for me that still exist

Ice cream from m hometown, Denville Dairy an

frozen key lime pie. Now whil I'll go to my grave with th

strong and correct, I might ad , assertion that Denville D

iry makes the best ice cream ou of anywhere on the planet, whic

is a bold statement, it is just ice cream. The frozen key lime

pie may also sound a bit kin of specific. And the reasons

for both continuing past my s eet tooth phase, let's say is

the emotional attachment that I ave for each of them. Denville D

iry was the place we always ent growing up. So when good th

ngs happened, we went to Den ille Dairy. We had ice cream

akes there for our birthday , a lot of birthdays, I still d

drive out and get another one. nd I fully realized that a la

ge part of that nostalgi emotional connection I have is

hat drives that. And the same thing goes for the frozen ke

lime pie, except instead of childhood connection, it's the

treat that Lauren and I ate on our anniversary trip

own in the Florida Keys when we found out she was pregnant with

our first child Avery. So remember exactly where I was,

remember going out and celebr ting like that. I know that

I'm being influenced by my emo ions but in this case, it's

okay. It feels you know, feels g od. What you need to know thoug

when it comes to investing is t at we're also extremely emotiona

. But it often doesn't really re ult in a good feeling. Making

r losing money makes us emoti nal and when we get emotional,

we tend not to take the best app oaches. As we discussed in t

e first series 1.6 Investments hould Be Boring, we recommend

preading out your money in ifferent areas all the time

because while every market a ea will generally go up over

ime, in the short term, no one i really sure what area is goi

g to do the best. So essential y, what does the best this

ear may likely not do the b st next year. And that make

sense, right? However, when you look at your account, and fund A

went up 20% last year and fun B went down 5%, I'm guessing y

ur first reaction won't be to ay, 'hey, let me take money o

t of that fund A which was so great and put into fun B th

t kind of stunk?' No, of course ot, you're much more likely t

say 'well, you know, forget und B, let's put it all into fun

A! Let's go!', right? So you can see there's easily a discon

ect between the logical "every year a different area tends

to lead" with the practical "ta e money out of the ones that d

d the best and put into the ones that did the worst" action off o

that, because your emotions ca quickly get in the way. And you

may be surprised to hear ther 's actually a whole invest

ng approach that's called he odd lot theory that's base

on doing exactly the opposite f what individual or wha

they call retail investors do, s opposed to what institutional

ype investors are doing. So when normal people buy stock, they do

't buy in a flat, even kind o a quantity. They might b

y 17 shares or 31 shares, what ver they can kind of afford is

hat they buy. And it comes out t this random kind of odd num

er. Institutional Investors n the other hand, they buy

n what are called round lots. o say 1000 shares 2000 sh

res. So with this approach essen ially looks at is what are all t

e 17 and 31 share type transac ions or odd lots. What are the

doing? And let's simply do the opposite. Because we're goi

g to go ahead and assume that normal individual investors are

robably doing the wrong th ng. So, where the emotions t

nd to be the most debilitati g though, is when there are

arge drops in the market. You he r about it on TV, the radio, the

bring in experts about how fas the sky is going to fall. My fa

orite though, is the pict re of the disheveled stockbroke

on the floor of the exchange you know, you could picture h

m kind of pulling on his face wi h just papers flying everywhe

e behind them, they, they see to always have that

ne ready to go. This environment though, where things are

ropping, it makes it exceedingly difficult to not act emotiona

ly. What makes it so bad here, t ough, is that if you say sell af

er everything drops, because y u're afraid, so fear and emoti

n, and you're afraid that it' going to drop more, you h

ve put yourself in a position th t you can't recover now. You c

n't regain what you lost if ou aren't invested. What you ca

do, though, to try and counte act this is to plan emotionally

ahead of time, both for the da to day and the big drops. It's

almost assured that there will be another and more likely man

of these events in your li etime. Historically speaking, t

ey happen every six years or s on average. So the 12 years be

ween 2008 financial crisis and 2020's COVID was actually

uite a large spread. So the q estion you should be asking you

self is really more, 'wh t are you going to do emotional

y to prepare yourself for whe , not if, the next one comes?'

he first thing to know, you will most likely be emo

ional. Just like I know emotio s are influencing me to drive

out and buy that Denville Dai y birthday cake still. So don'

tell yourself, you'll be les emotional next time, you a

most certainly will. It's going o be a new situation with new

causes. Same drop, maybe. But it s very, very difficult to no

act emotionally. So just expect ng yourself to not be the same

xact way in this upcoming scenario, whatever it may happen

is probably not a likely way hat it's going to unfold. Second

is you shouldn't have any money nvested that you're going to nee

in this next, say one to two ears anyway. So remember, you ha

e years of time for these i vestments to come back up again

when you're going to need them. ny short term money again s

ould never be put into an investment. Next, whether thr

ugh an advisor or on your own hrough an allocation type

of a fund, having someone outsid of yourself managing the fund

on a mathematical basis making those rebalancing decisi

ns so selling areas that have one well and reinvesting into a

eas that haven't done as well lately removes your emoti

ns as having an input in thos day to day. Lastly, for thos

particularly big drops, remem er what makes the market go up

and down. In series 2, 2.5 to be specific, we talked about S

ocks Lead, Don't Follow and h w the stock market is a leading

ndicator. Investors are acting on what they think will happen a

d if they have no idea what wil happen, so if there'

a very high degree of uncertain y, things tend to drop very

apidly. So think COVID before we knew what it was or had

much of a plan, or the financi l crisis back in 2008,

before we knew how the governmen was going to respond. Once inv

stors believed they had some i ea of where things were going a

ain, you started to

So as a recap for today, realize that you're not at all alone,

when it comes to mixing emotions with investing. Everyone out

there does that to some degree. Those who manage it, though more

successfully are the ones who set up a proper system and

mindset,. They acknowledge it will almost certainly happen

again, multiple times over, they only invest funds they are not

going to need for the next few years. And they use an outside

resource whether through an allocation fund or a diversified

program through an advisor. So they're not in direct control

for emotional decision making. Finally, they realize that

uncertainty tends to be the biggest market driver and as

that changes, so things become less uncertain, the direction of

the market will likely change as well.

So as always, thank you very much for tuning in today. If you

are able to implement what we're talking about in this episode,

or any episode that's just fantastic. You have less to

worry about than before. You can just focus on what we're all

wanting to do, which is enjoying life. If you are wanting help

with these things though, or you have questions you need help in

clarifying, check out the Ask Joe section on the show's

website www.EnjoyMore30s.com. That's EnjoyMore30s.com and if

you did enjoy today's episode specifically, make sure to again

jump on, review, follow, subscribe on Apple podcasts,

wherever it might be. There are literally millions of young

families out there I'm trying to reach and help just like you.

We've now come to the final episode already of this series

and it's called Advisors Aren't Hershey Bars where we're going

to discuss what you need to know about the many different types

of advisors out there. You might be surprised about how many

differences there can be and what you can do to make sure you

find one that's a good fit for you if you are wanting one.

Until next week thanks for joining me today as always, and

I look forward to connecting with you again soon.

The conversations on this show are

Joe's opinions and provided for general information purposes

only. They do not constitute accounting, legal, tax or other

professional advice for your specific situation. You should

always seek appropriate advice from a financial advisor,

accountant, lawyer or other professional before acting upon

any content or information found here first. Joe is affiliated

with New Horizons Wealth Management LLC, a branch office

of TFS Securities, Inc., and TFS Advisory Services an SEC

Registered Investment Advisor member FINRA/SIPC.