Taking emotion out of investment or business decisions requires effort.
For many, business is personal. The investment choices feel personal because we use personal resources to fund those decisions. We should feel strongly connected, but when we become emotional, that’s when trouble begins.
Empathy creates an opportunity for others to be part of the solution. How you react and connect with others impacts your ability to make a difference. Do you empathize and listen? Or do you sympathize and draw yourself into the story line? Listening is the first step to learning how you can make an impact in others’ lives.
In business, part of being a strong leader is listening to the talented associates you drafted to your team and letting them share their ideas and plans. It can take some real practice to not interject an opinion all the time. By listening, managers can help people work out problems. Managers learn to work out the problems themselves, with your support. Then you build a stronger team.
In the world of investments, when we talk about taking emotion out of decisions, acting in the heat of the moment can result in major financial losses. Feeling anxious about a stock’s performance, rushed to sell while the market’s up, influenced by feedback from another emotional investor who’s raving about a purchase — this is dangerous territory.
With investments, it’s all about the numbers. It’s not how you feel about a company, whether you can relate to the owner or if you have a connection with the brand. It’s about performance — track record. Emotional investment decisions are made on a whim, and that’s easy to do with the availability of information.
We are bombarded with status updates and stock reports in real-time. To make wise decisions, you’ve got to turn on a filter — know when to react and when to rest easy.
The Fedeli Group conducted a study to learn more about who invests in our mutual funds. We wanted to know about their investment habits and what makes them successful. What we found out was the best investors are those who buy funds and forget they own them.
Their performance was not about what they did, it was about what they didn’t do. They kept watching the market go up and down, and they stayed the course. When you get too emotional with investments, you work to get in on an “opportunity” and jump out too soon, and then when the stock comes back, you miss the real win.
Is staying the course easy? Of course not. Is listening when you want to give advice a natural thing for leaders and managers? Well, no, it isn’t. But when we can pause and read the intentions of others — really connect, but not dive into their emotional wreck — then we can make a real difference. ●
Umberto P. Fedeli is CEO at The Fedeli Group