Have you ever found yourself watching MarketWatch, CNBC or CNN and feeling the need to immediately make an investment decision based on emotional or personality-driven thoughts or characteristics?  If yes, you’re not alone.  According to a recent global survey by Barclays Wealth, a large percentage of wealthy investors not only realize their tendency to make decisions based on emotions but would welcome help in dealing with the problem.

One of the keys to success is recognizing that a problem exists and devising mechanisms to control or limit bad decisions.  In their report titled “Risk and Rules: The Role of Control in Financial Decision Making,” Barclays Wealth listed the “Failures of Rationality,” which were found in four types of investment decisions:

1. Failing to see the big picture: instead of making decisions while keeping the entire portfolio in mind, investors will end up investing too much in a single asset class, industry, or geographic market.

2. Using a short-term decision horizon: when investors focus on short-term returns instead of long-term wealth accumulation, their willingness to take short-term risks is too low and they often make the wrong investment decisions.

3. Buying high and selling low: investors who do what’s comfortable for them during bullish or bearish market conditions tend to buy when markets are high and sell when markets are low, which is a risky strategy that fails to take advantage of market opportunities.

4. Trading too frequently: when investors’ emotional and personality traits take hold, they tend to take an irrational favoritism towards action, which can lead to an increase in investment costs and other poor decisions.

What else did the Barclays survey find?  There is substantial improvement in investment decisions as people get older.  Older investors were much less likely to trade too often, try to time the market or base investments on short-term considerations.  They were also more satisfied with their financial situation.

The survey also found that women are better long-term investors than men, who tend to take more risks and are more likely to favor frequent trading and efforts to time the market.  Because women have a higher desire to use self-control strategies (which they are also more likely to believe are effective), women tend to trade less and earn higher returns over time.  The report identified seven self-control strategies to help people counter their tendencies to make bad financial decisions:

1. Limit the options: purchase illiquid investments to avoid the urge to sell investments when the market is falling.

2. Avoidance: avoid information about how the market or portfolio is performing in order to stick to a long-term investment strategy.

3. Rules: establish and use rules to help make better financial decisions, such as spend only out of income and never out of capital.

4. Deadlines: set financial deadlines; for example, aim to save a certain amount of money by the end of the year.

5. Cool off: wait a few days after making a big financial decision before executing it.

6. Delegation: delegate financial decisions to others, such as allowing an investment advisor to manage your portfolio.

7. Other people: use other people to help reach financial goals; an example would be meeting with a financial advisor to make and execute a financial plan.

Even if these popular investment mistakes don’t apply to you, they still make a good point in the fact that making financial decisions shouldn’t be based on emotional or personality-driven thoughts or characteristics.  Having a rational investment strategy in place is crucial in making the right financial decisions.  You wouldn’t make a decision about buying a house or having surgery without thinking it over and going to the experts for advice, would you?  Your investment decisions and financial management choices not only determine your future, but the future of others as well.