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Stock prices will always be volatile. Every form of media extensively covers the stock market. As a result, stock prices are influenced by all major events, whether they are political, social, or economic. Elections, earthquakes, terrorists, unemployment, assassinations, foreign affairs, the dollar, war, peace, and much more: All send stock prices up and down.

During bubbles, extensive media coverage will lead you to be overconfident in your ability to pick stocks. If you are caught up in the herd hysteria, you may even reach a sense of grandiosity, believing yourself an investment genius. Addiction can take over as you constantly seek the high of easy money.

A sudden drop in stock prices triggers more troubling emotions. Some investors panic and sell everything. Panic is highly discouraged by those who make a living selling stocks. Investors who panic and sell out often feel guilty that they went against the advice of investment professionals. However, panic is the clearest sign that stocks are outside your comfort zone. A good panic can save you decades of trouble. Investors who panicked and sold in 1929 got over the guilt and had no regrets for the next 21 years.

Investors who panicked in 1966, 1970, and 1974 got over the guilt and had no regrets until the mid-1980s.

Step 2 explains in detail how you can gain self-knowledge from an emotions inventory. An emotions inventory is similar to a physical inventory of goods in a shop or investments in a portfolio. It is done for the same purpose as well. Goods that are defective must be discovered and discarded; investments that have no future must be liquidated. Emotions that prevent investment compatibility must be recognized and isolated to make room in the psyche for those that are functional. Thereafter you will be investing in your comfort zone.

This simple process has worked for me, an ordinary investor, and it will work for most of you. I do not claim any high level of emotional maturity or spiritual development. No one who knows me would describe me as a saint or a guru. I am not a trained therapist. I do not have an MBA. I am not a Certified Financial Planner, and I am not a Chartered Financial Analyst.

After 21 years of living off my investments and taking regular investment emotional inventories, I do know which investments work best with my personality and which investments irritate me or keep me awake at night. By staying in my comfort zone, investing is fun for me. It will be fun for you too, though you may not see that yet.