Humans are all emotional beings. We do not always make decisions 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 steer clear of it at all costs.

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

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

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

The next question is 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 want to have a Mercedes in your life. It's luxurious and has nicer looking features than a Civic has. But, that does not mean you should overpay for it. It works similar with stock investing.

Google is a very good search engine, probably the best that's ever produced so far. Sure, you most likely pay more for Google than other generic search engines. But, please do not over pay. You invest in Google to profit from it not because you like its products.

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

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

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

For a business that is growing such as 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 are thinking about buying stocks for a company going public, make sure you've done all your research. Many companies go public to enhance their business plans. For more info, search: company go public.

I know I didn't specifically provide you with the best remedy to the problem. Emotion is hard to ignore. I am not immune to that. But following your emotions will cost you a great deal of money.

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

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