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Humans are all emotional beings. We do not always make choices rationally. Emotion is part of us as investors. Investors might feel better towards stocks at certain point or they may feel that owning stocks are risky and avoid it at all costs.

Investors might also feel attached to a specific company and continue owning the stock without regards to how the company is doing. For instance, you might like Google's search engine so much that you decide to purchase the stock at $350 without doing any research.

You figure that Google's internet search engine is so much better that buying the stock will give you profit, right? Wrong. Now, I am not right here to bash Google as an investment, but analyzing an investment goes beyond the products and companies.

Most investors can identify excellent companies and products. It really is quite easy. You know that a Mercedes is a better car than a Ford or a Civic.

The next question is just how much should you pay for a Mercedes or a Civic? This requires us to put aside our emotions for one minute and think clearly.

Sure, you'd like to have a Mercedes in your life. It really is luxurious and has fancier features than a Civic has. But, that does not mean you should overpay for it. It works similar with stock investing.

Google can be a great search engine, probably the best that's ever produced so far. Sure, you probably spend more for Google than other generic search engines. But, please don't over pay. You invest in Google to profit from it not because you like its goods.

So, how do we get rid of emotion from our investing decision? We can't eliminate it fully but there are certainly tools that might help.

One would be to calculate the fair value of a common stock that you are investing in. I covered this plenty of times, but basically, the fair value of an investment is determined by the streams of profit generated by it.

In the long run, if company X earns more than company Y, then business X will be valued more than business Y.

For a company that is growing like Google, you can incorporate its growth and calculate the fair value with growth. I have talked about this once and you are welcome to look at our commentary section.

If you're considering purchasing stocks for a company going public, make sure you've done all your research. Lots of companies go public to improve their business plans. For more information, search: company go public.

I know I didn't specifically give you the very best solution to the problem. Emotion is difficult to ignore. I'm not immune to that. But following your emotions will cost you a lot of money.

Just watch those investors that bought stocks through the NASDAQ peak in 2000. Don't follow the herd and keep your focus on the fair value of your stock. You may do really, truly well.

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