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How to avoid emotional decision making

Keep your head when those around you are losing theirs
How to avoid emotional decision making

As investing gets easier and cheaper, concerns are growing that the stock market is increasingly being treated like a casino. The frenzy over so-called meme stocks shows the extreme end of market madness, with struggling cinema chain AMC Entertainment’s (US:AMC) shares defying any conventional logic to reach a high point of $72 (£50.85) last week – up from $2 at the start of the year. 

Fortunately, I doubt Investors’ Chronicle readers are turning to Reddit’s WallStBets page for sensible long-term investment ideas, the lead forum where meme-stock traders congregate. But that’s not to say that you are free from the risks of emotion-led decision making, which could throw your financial plan off course. 

The rise in private investor activity over the past 18 months has been remarkable, both in terms of people setting up accounts and existing investors dealing more often. Multi-asset investment platform eToro’s results last week revealed that customer trading volumes were 233 per cent higher in the first quarter of this year compared with the same period last year, with roughly 300,000 people in the UK joining the platform in the first three months of 2021.

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