One of the biggest follies amateur investors/punters fall into is getting WAY too emotional about things.
They get scared out of winning positions, get into denial over losing positions thereby letting them run against them, get too wound up about being ‘right’, but worst of all, getting ‘loyal’ and ‘in love’ with a particular asset or instrument. This is deadly to your Wealth Equity curve. Like, seriously deadly. I’ve wiped myself out too many times to recall all because I fell in love with an asset, went all in either to get burned straight away or even worse, be dragged into a multi-year stagnant relationship. And it really is a one-sided relationship.
Whilst you’re head over heels for this asset, it couldn’t give a shit about your feelings or loyalty. Hell, it doesn’t even know who you are. It’s like being a creep that’s infatuated with a celebrity and you sell everything to go all in on this ‘crush’.
I once had a serial-cheating ex in my early 20s who used my heart as a ping pong ball. It was a 3-year emotional roller coaster which left me cold, broken and emotionless inside for quite sometime. Looking back on them days I was a bit of a wet pandering puppy and no girl likes a needy partner. But hey, it was a cracking lesson. And this analogy 100% applies to investing!
So you really need to check yourself before you wreck yourself. Ask yourself:
i.) Is there an asset which I’m head over heels for at the moment?
ii.) Is there an asset which I’ve gone all in on?
iii.) Am I checking the price of a particular asset more than once a day?
iv.) If a particular asset bombs, will it dramatically affect my personal net worth?
If you’ve answered YES to ANY of those questions, you need to have a long hard look at yourself in the mirror and tell yourself to stop being a MUPPET! (It’s for your own good!) It will only end in tears.
The upside to all of this still ends in tears. WHY? Well let’s say you’ve gone all in on something and it does end up spitting out crazy profits. Well it was hardly skill. Mostly luck in most cases. You most likely haven’t really learned much from it other than the fact that going all in on something equals ‘BOOM TIME BABY’. So guess what you’re extremely likely to do again at some point soon?
Yup, you’ll find another hussy to cling onto and you’ll mostly likely get burned even worse and lose your newly gained profits and also your principal.
Bit of a brutal lesson but it’s tough love! I’ve learned the hard way in life and the markets and if this article saves one person, my job is done! Happy investing all!