What is sentimental?

In an investment context, being sentimental means using emotions in making investment decisions. This can manifest itself in both individual investment decisions and in the wider investment community - where it is then known as market sentiment.

Where have you heard about sentimental investing?

You may come across a question in the problem section of the financial newspaper asking about whether holding on to shares the writer has had for a long time is a good idea, such as in this example in the Chicago Tribune (http://articles.chicagotribune.com/1994-08-10/business/9408100092_1_shares-at-net-asset-bond-funds-massachusetts-investors-trust). The writer has inherited the shares and wants to leave them in his will, but he questions if this is the right thing to do financially, or if he can follow what he wants to do for sentimental reasons.

What you need to know about sentimental investing.

Sentimental investing can arise when for example you love a particular brand and buy into the brand, rather than looking at the hard economics of profits, earnings per share, growth or dividends when you buy shares in a particular company.

It can also mean that you hang on to a share because, say it has always performed well for you, or it was the first share you ever bought, or perhaps you were left it by a parent rather than looking at the reality of how it is performing now.

Investors are not always rational when it comes to economics, as the recent study of behavioural economics has revised traditional economic thinking. But sentimental investors need to remember that they may love an investment, but that investment doesn't love them back.

Find out more about sentimental investing.

See also market sentiment or download a free guide to behavioural economics: https://www.behavioraleconomics.com/.