When Your Emotions Want to Trade: How to Make Better Investment Decisions

The Financial Wagon welcomes you to Wealth Wednesday, where building wealth is not always about finding a better investment. Sometimes it is about making a better decision when markets are giving you every reason to feel excited, nervous, impatient, or certain that you need to do something right now.

Money is emotional.

We work hard for it. We worry about losing it. We imagine what having more of it could allow us to do. So expecting investment decisions to be completely emotionless is probably unrealistic.

The better goal is recognizing when emotion has started making the decision for us.

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Watching an investment decline is uncomfortable.

A portfolio falls 10%, and we begin paying more attention. At 20%, we start wondering whether something is seriously wrong. Eventually, selling can feel like the only way to make the anxiety stop.

But market declines are part of long-term investing.

BlackRock Chairman and CEO Larry Fink wrote in his 2026 annual letter that “staying invested has mattered far more than getting the timing right.” He noted that some of the market's strongest days have occurred during periods filled with unsettling headlines.

Selling because your financial goals changed can make sense. Selling simply because prices fell deserves a second look.

Fear gets plenty of attention, but excitement can create equally poor decisions.

An investment keeps rising. Friends are talking about it. Financial news cannot stop covering it. Suddenly the biggest risk seems to be missing out.

We may invest more than planned, ignore valuation, or buy something we barely understand.

Before acting, ask yourself:

A little structure can keep excitement from becoming strategy.

Maybe you sold an investment before it doubled. Maybe you held something too long. Maybe you missed an opportunity that now looks obvious.

Looking backward can make the next decision worse because we start investing to correct the last mistake.

Warren Buffett offered a useful perspective in his November 2025 Thanksgiving message: “Don’t beat yourself up over past mistakes – learn at least a little from them and move on.”

That works surprisingly well as investment advice.

The market does not know what price you previously paid, sold at, or almost bought at. Your next decision should be based on what makes sense today.

One of the stranger parts of investing is that patience can feel like inactivity.

We see markets moving every day, so we assume our portfolios should be moving too.

But activity and progress are not the same thing.

Berkshire Hathaway CEO Greg Abel summarized the company's long-term approach in its 2025 shareholder letter with a simple principle: “Maintain discipline and let compounding unfold.”

Sometimes the difficult decision is not buying or selling.

It is waiting.

Create your investing rules when markets are relatively calm.

Know your target allocation. Decide how much risk you can tolerate. Keep appropriate cash for near-term expenses. Set limits for speculative investments. Rebalance based on a schedule or defined thresholds rather than headlines.

When you feel a strong urge to make a major change, revisit the original reason you own the investment.

Ask what actually changed.

If the answer is mainly your mood, give the decision more time.

Emotional investing can take several forms. Fear can push us to sell after declines. Excitement can make us chase recent winners. Regret can make us fight yesterday's mistakes, while impatience can make us trade simply because doing nothing feels uncomfortable.

The goal is not to eliminate emotion.

It is to prevent temporary emotions from changing long-term plans.

Investing will never feel perfectly comfortable.

Markets rise, fall, surprise us, and occasionally make almost everyone question what happens next.

That uncertainty is part of the process.

Build a financial plan before emotions get loud. Know why you own what you own. Diversify thoughtfully. Give good investments time.

Sometimes the most profitable investment skill is learning when your emotions are asking for action—and deciding they do not get the final vote.

Thank you for reading The Financial Wagon. Return for our next issue, Financial Officer Friday, where we'll continue exploring the financial decisions and behaviors that help businesses and individuals build, protect, and grow long-term value.

— Ryan Rincon, CEO and Founder at The Wealth Wagon Inc.

Disclaimer: This newsletter is for informational and educational purposes only and reflects the opinions of its editors and contributors. The content provided, including but not limited to real estate tips, stock market insights, business marketing strategies, and startup advice, is shared for general guidance and does not constitute financial, investment, real estate, legal, or business advice. We do not guarantee the accuracy, completeness, or reliability of any information provided. Past performance is not indicative of future results. All investment, real estate, and business decisions involve inherent risks, and readers are encouraged to perform their own due diligence and consult with qualified professionals before taking any action. This newsletter does not establish a fiduciary, advisory, or professional relationship between the publishers and readers.