Master Your Emotions And You Can Master The Market’s True Wealth Building Power

Posted On April 23, 2018 12:23 pm

In the first three parts of this risk management series I’ve explained the importance of:

In this article let’s explore one of the most important aspects to proper risk management, investing, and life in general. Specifically I’m talking about emotional control and staying calm in the face of short-term market panic.

Source: Slide Player

As the saying goes, “Rome wasn’t built in a day”, and the same is true for any long-term financial goal. The bigger the goal, say saving for retirement, the more important it is for investors to avoid making the kind of emotion driven mistakes that result in terrible long-term total returns.

Source: JPMorgan Asset Management

According to numerous studies, including this one from JPMorgan Asset management, investor attempts at market timing have historically resulted in absolutely abysmal returns. For example between 1996 and 2015 not just did the average retail investor underperform the S&P 500, but all asset classes and even historically low inflation.

A helpful way to avoid overreacting to short-term market gyrations is to remember the 10/10/10 rule. That says that you need to keep in mind how you’ll feel about any decision/event in 10 days, 10 months, and 10 years. This is a great way to help you avoid acting on short-term knee-jerk emotions, and instead take a long-term perspective.

About author

Dividend Sensei
Dividend Sensei

I'm an Army veteran and former energy dividend writer for The Motley Fool. I currently write for both Seeking Alpha, Simply Safe Dividends, and DividendSensei.com My goal is to help all people learn how to harness the awesome power of dividend growth investing to achieve their financial dreams, and enrich their lives. With 22 years of investing experience, I've learned what works and more importantly, what doesn't, when it comes to building long-term wealth and income streams. I'm currently on an epic quest to build a broadly diversified, high-quality, high-yield dividend growth portfolio that: 1. Pays a 5% yield 2. Offers 7% annual dividend growth 3. Pays dividends AT LEAST on a weekly, but preferably, daily basis

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