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Investing: Mind over Matter

By 24th September 2020November 3rd, 2020.
Simple Successful Stocks Mind over matter

I created the freedom to leave my job with the wealth I had created through investing.  At the time a trustee of the charity where I worked commented that it must be my ‘feminine intuition’ that enabled me to do this.  Intuition actually has nothing to do with successful investing!

INVESTING IS EMOTIONAL

One problem with investing is that it’s very emotional.  There’s the fear of losing money and the fear of missing out when other people are making money.  There’s the excitement of seeing your investments grow, the desire to make more getting out of hand and becoming greed and the fear that when things are going well it just won’t last!  There’s even a branch of psychology called behavioural economics to explore what’s going on when investors make irrational decisions.  A key finding it’s made is that we are prone to suffer more pain when we lose money than we are likely to feel delight and happiness when we make money.  Mobile phones don’t help at all, with their instant access to the media and investors checking the ups and down of their investments through the day.

FEELINGS SABOTAGE INVESTING SUCCESS

The time when most investors lose money is when the the stock market is falling.  It feels awful to see our investments go down in value.  Something I have experienced and know to be true!  We fear further losses, we fear that it’s all going down the tube and we may panic and sell.  Even though most stock markets recover in the long term and continue to grow, it’s very difficult to remember this at the time.  Our feelings can drown out everything sensible we have have learned about successful investing.  The problem is that if we sell our investments when things are going down and then wait for calmer waters to reinvest it means we often miss out on time ‘in the market’ where gains could be made.

IT’S NOT PERSONAL

It’s difficult to separate who we are from how our investments are doing.  I’ve met a number of people whose emotions were a roller coaster ride: euphoric when things were going their way and in the depths of despair and even angry when they weren’t.  They were traders rather than investors – buying and selling stocks, commodities, currencies etc in the short term (hourly, daily or weekly).  Whereas investors build wealth in the long term by buying and then holding stocks, funds and bonds, enhanced by the magic of compounding.  People addicted to trading put me off big time!  I was always far too busy to pay much attention to what the stock market was doing on a daily basis.  I have only invested money that I could afford to lose, had a clear strategy and stuck to it and not been attached to the results.  This has helped me take the losses and gains with a pinch of salt and not to take it personally.

KEEP CALM AND KEEP INVESTING!

It’s normal to have all these emotions about investing.  The important thing is to be aware of them rather than react or do anything rash – which isn’t at all easy! Having a clear purpose, a powerful reason why you are investing and a picture of your long term financial goals will help you to steer a steady course.  Removing uncertain feelings from the picture can be done by setting up an automatic investment plan with regular payments every month and a range of investments which will spread your risk.  It also helps to be busy and get on with your life.  So then you are not tempted to fiddle, tweak, take money out or do anything in panic.  And even if you do it’s not a mistake.  Every so called mistake is not a mistake because it is how we learn to become confident investors.  It’s all about how you approach it.

Disclaimer:  Simple Successful Stocks are not financial advisors and the content of this article is for financial education only.  Please read our disclaimer here.