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When It Comes To Investing, Leave Your Emotions Out Of It.
Copyright © 2005, Franco Smeaux
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When it comes to investing, leave your emotions out of it.
When it comes to many areas of your life you can rely on your
emotions and instincts or gut feelings. But when it comes to
investing in the stock market this is a big mistake. Not many
people are able to use their instincts to make successful
trades. So if the professional investors can’t do it then you
shouldn’t fool yourself into thinking you can, especially if
you a beginning investor. You need to invest with a proven
strategy that has its foundation backed by fundamentals and
solid research.
The same is true for your emotions. Most investors are driven
by two main emotions, namely fear and greed. And, as has been
proven time and again, using fear and greed to guide your
investment decisions will usually lead you to lose money.
When you see a negative news story about a stock in your
portfolio and you fear for your money, you may rush to call your
broker and scream “SELL, SELL, SELL!” Without a second thought.
This is a serious error. You are not making a rational decision
by doing this. Emotions have no place in trading.
I am certainly guilty of this myself. I was watching CNBC one
day about one of my stocks and the news was not good. My stock
was down 25% in one day! I sold. Then I sat down and took a
step back to see how bad the news really was. The stock was
punished too severely. The news was nowhere as bad as I thought
it was. Life went on and the “grey clouds” passed over the
company.
The worst part was that I never bought back into the company and
missed as it zoomed from $8 to $28! Only a 350% gain I missed
out on because I let fear and greed make my investment decision.
The point is whenever fear or greed is involved, you will lose.
Another big emotion that can prevent you from making good
investment decisions is love; falling in love with the company
you have an investment in. When the stock is falling due to the
fundamentals and the business is no longer viable and it comes
time to dump it, you need to be able to do it without blinking.
If you can’t separate your love from the company then it will
cost you big. Try to never get attached to any of your
investments. You became an investor for one reason and one
reason only...to make money.
You are not investing because you love the stock or because you
enjoy the rush. You are doing it only to make money. Period.
Never get emotionally attached to anything you invest in.
Because if you do and can’t separate yourself from the stock
then you’ll never make any money because the only way you’ll
make any real money is when you actually “sell” the stock.
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Writer's Resource Box:
You can get wealthy investing in the stock market as long as you
can keep your head on straight and leave your emotions at the
door. Franco Smeaux is the owner of Lux Investing, a
premier resource for investing information. For more
information, go to http://www.luxinvesting.com
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The article on this page is Copyright © 2005, Franco Smeaux
You are not required to show the creative commons license
notice when you reprint this work.
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