3 Ways to Build your Emotional Investing Intelligence Quotient

What if we contemplated what makes a good investment before following the crowd? Would it be a dynamic, colorful, trending product that is on an upward path to success? What if below the surface it is intangible, ethically-questionable and deep in debt? How would we know?

It is not feasible to be fully educated on all matters of finance and economics, but gaining wisdom (building your Emotional Intelligence Investing Quotient) and following a few rules of thumb will help shield us from making costly mistakes that affect ours - and our family's future.

1. Know the Cycle of Investor Emotions which illustrates how emotions play into risky stock market decisions. Make it a goal to not follow the crowd - especially at the peak of hysteria - but research what you are getting into and make rational, calm decisions. A good read to this day, "Extraordinary Popular Delusions and the Madness of Crowds", by Charles Mackay, presents a study on crowd psychology and economic bubbles.

2. Think about your risk tolerance and manage your risk exposure effectively. This is a personal comfort level with how conservative or aggressive you are with investments. A conservative approach will minimize losses and focus on long-term growth, while the opposite may promise short term gains with a chance of losing it all. A good investment advisor will balance your portfolio to suit your personal needs, style and long term goals.

3. Research and understand Value Investing. Warren Buffett's teacher, Dr Benjamin Graham, wrote The Definitive Book on Value Investing - The Intelligent Investor. Originally published in 1949, the philosophy rings true today - focus on minimizing loss, be patient, look for bargains, and, keep emotions out of the decision. Value Investing is a long term proposition and, just as Berkshire Hathaway has experienced portfolio losses from time to time, it overwhelmingly out- performed the market in the long term. Lesson? Patience, my friend.