It is only natural that as humans we allow our emotions to get in the way of our better judgment, especially when it comes to investing. Too often, when reflecting on our past saving and investment decisions we realize that fear, greed and mere procrastination played a significant role. As such, in this article I will explore some tips to help overcome these common psychological deterrents.

In times of uncertainty or crisis, investors tend to react with emotions rather than with rational thought. Looking at the US stock market in 2011, there were numerous pull backs attributable to factors such as the European debt crisis and the downgrade of the US credit rating. However, these events presented many buying opportunities for savvy investors as several blue chip stocks were trading near 52-week lows. For instance, the world’s largest heavy equipment maker, Caterpillar Inc dipped below US$70.00 at the beginning of October amid global economic uncertainty but by the end of the month the stock bounced back above US$96.00, an approximate 37 per cent gain.

While many investors ten to be hesitant to buy stocks during doldrums, understanding and analyzing the fundamentals of an investment will help to mitigate the natural effect of fear. The market has been trading on weak investor sentiment and not necessarily fundamentals as several companies continue to perform above analysts’ expectations. Take for example Apple Inc, which has more often than not surpassed estimates. Last year, after trading above US$400 for the first time in its history, Apple fell to US$353.21 presenting to pick up the stock close to its 52-week low and in some cases to average down. The stock has subsequently rebounded, reaching an all-time 52-week high of US$427.75, an approximate gain of 21 per cent.

Don’t despair if you missed out on purchasing Apple six months ago as SSL currently has a twelve month price target of US$500 on the stock. Furthermore, additional opportunities still exist. General Electric Co (GE) is another stock that offers growth potential with a price target of US$23.00 coupled with a stable dividend payout of 3.61 per cent. GE is a diversified conglomerate with operations in almost every industry of business/commerce globally, allowing consistent performance, as strong demand in one region or industry tends to offset weaker demand in another.

Investors should also bear in mind not to allow greed to shroud rational thought. With any investment it is important to analyze the risk involved. Oftentimes when it seems too good to be true, it often is. Sound advice is to stick to Companies with strong fundamentals, a history of stable earnings strong management team, innovation & diversification, such as those mentioned above.

Additionally, having a well thought out investment strategy will also help to provide discipline when investing. Clearly stating your goals from the onset — an average of 20 per cent return on your portfolio, supplementing your income or to simply mitigate the effects of inflation, will aid in determining an exit price. However, it is more important is to stick to your stated target and not allow greed to turn satisfaction into disappointment.

Lastly, investors often not only fail to plan but also to implement their plan due the common misconception that it takes a large initial outlay to begin investing. It’s important to remember the old adage “a penny saved is a penny earned”. It is vital to save and invest wisely and consistently in order to reap the rewards in the future. When determining how much funds you are able to set aside for investment, think of it as paying a utility bill and this will ensure that you consistently “pay yourself first”.

As discussed in recent “SSL in Money” articles there are various investment options to consider for one’s investment portfolio. However, ensure that you diversify your portfolio to provide both income and growth. With a dividend yield of 9.4 per cent, Carreras Ltd offers a steady stream of income which if reinvested will help to grow your portfolio in the long run. Additionally, to improve overall yield of your portfolio, look at stocks that offer growth potential such as The National Commercial Bank of Jamaica Ltd. While the stock price has increased 40.6 per cent year over year, it has a P/E ratio of 5.18 times, the lowest when compared to its industry peers, indicating room for growth.

Still, while your Wealth Advisor will assist you in creating your portfolio, the decision is ultimately up to you and it’s important not to let emotional barriers act as deterrents to achieving your financial goals for 2012.

Gillian Bernard is a Wealth Advisor at Stocks & Securities Ltd. You may contact her at gbernard@sslinvest.com