Managing your emotions

I’m sure you’ve heard of Thomas Edison. He was one of the greatest inventors of all time, with more than 1,000 patents. The electric light bulb, the record player and the alkaline battery are some of his best-known inventions. He also founded General Electric, one of the first global industrial giants. Edison’s achievements were not the result of mere chance, but rather of a tried and tested method, flawless organization and, above all, unwavering strength of mind. In this post, we’re going to look at the important topic of state of mind and, more specifically, how to manage your emotions. To get started, I’d like to share an anecdote from Ryan Holiday's excellent book The Obstacle is The Way.

On the evening of December 10, 1914, Thomas Edison learned that a huge fire was raging in his research laboratories and production plants. Since chemicals were stored there, it was an astonishing sight, with yellow and green flames illuminating the sky. The scene was so striking that Thomas Edison said to his son, “Go get your mother and all her friends. They’ll never see a fire like this again.”

His reaction is rather surprising, to say the least. Despite a financial loss of nearly $1 million, the equivalent of $23 million today, he was able to remain calm and be mindful of the moment. Later, in an interview with the New York Times, he said, “Although I am over 67 years old, I'll start all over again tomorrow.” Thanks to a generous loan from Henry Ford, operations resumed quickly and, a year later, turnover had reached $10 million!

Self-discovery comes when man measures himself against an obstacle.

Active traders can take inspiration from this story to better manage their emotions. Every day, they face the possibility of losing significant amounts of money as a result of unfortunate events affecting a portfolio security, such as the departure of a CEO, the arrival of a new competitor or a profit warning announcement. Although we are at the mercy of such events, we can control how we respond to them.

To respond appropriately to the unexpected, the first step is to accept the fact that our desire to always be right is unrealistic. Then we will be better prepared to deal with unpleasant surprises. The second step is to understand that we cannot control our emotions. It is important to know that emotions are biological phenomena, that is, they occur naturally.

For example, before speaking in public, I suffer from a short bout of anxiety: my mouth is dry, my heart races, I have butterflies in my stomach, my hands are sweaty and my legs feel weak. My brain has detected an event that can threaten my self-esteem, which triggers immediate physiological reactions related to my defence system. Knowing that these physical manifestations appear automatically, I need to come up with a suitable response. That’s why we talk about managing rather than controlling our emotions.

Now imagine that one of your exposures sinks dramatically as a result of an unexpected event. All at once your heart beat goes up, you breathe more quickly and you clench your fists. By listening to your body, you will realize that you are angry, which is not necessarily bad or wrong. But it becomes a problem when you negotiate in this state of mind and buy shares impulsively and mindlessly or when you don’t follow the principles of diversification. Once you detect the presence of an emotion that could harm your performance, you need to moderate your impulses by giving yourself a grace period before you respond. Just like Thomas Edison, you’ll be able to act in your own best interests!

Want to learn more? Take a look at the training schedule on the Desjardins Online Brokerage website and sign up for the free Managing your emotions for better stock market decisions webinar presented by Marie-Ève Lécine, life coach and meditation instructor.

• Pauline Morsli Thomas Edison: inventions, ampoule, biographie, tout ce qu’il faut savoir sur le célèbre inventeur, MaxiSciences, December 13, 2017.
• Richard Feloni. Thomas Edison’s Reaction To His Factory Burning Down Shows Why He Was So Successful, Business Inside, May 9, 2014.
• Ryan Holiday. The Obstacle Is The Way: The Timeless Art of Turning Trials Into Triumph, Portfolio, 2014.