by: Franco Smeaux
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.
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