Overcoming the Emotion of Investing
When it comes to great investing strategy there are two things that you must be able to do, invest long term and have the proper temperament. The time line needs to be at least five years in order to get the returns you really want, and temperament is the emotional stability to be calm while the world around you goes nuts. Here is the simple math, when the market is down fifty percent there is no amount of luck or IQ that will get you back in the investing game.
There are some seriously wealthy people out there who have made considerable amounts of money by not only keeping their severely depressed stocks but actually buying more. What you should do is not freak out when you just lost over half your wealth on paper, you should use what is left to take advantage of the rest of the idiots out there reacting on emotion. Fortunes are made not by jumping around from stock to stock but investing in solid companies over the long term.
You need to get out of the roller coaster in order to manufacture a solid temperament. This is the only way you can seriously gain control and be in it for the long term. You need to start with your normal everyday life and make small changes to gain control of your financial plans. First things first you need to repeat in your mind that you are an investor NOT a speculator, now we can move on.
Purchase stocks in viable businesses. If you want to see a long term payout you need to have companies that will grow steady and slow over a long period – this can be through the increase of share price or dividend. Do not think you can anticipate the market flux, this is a sure fire way to make an idiot of yourself. If you are planning for retirement you can buy structured settlements or annuities in order to fund your expenses over time.
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- Stock Market 101 – Part 2