There are a lot of different factors at work when you invest. Trying not to let your emotions kick in is a major one.
Consider these factors and the impact they have on your investing, as Gareth Stokes explains in Fear, Greed and the Stock Market
You need to practice ‘patience’
Impatience can have a negative impact on your investing.
If you lose patience, you end up making decisions that are harmful to the trade you’re in.
Perhaps you’ve bought a really great stock based on in-depth fundamental analysis
You’ve been holding the stock for two or three months and have watched as the share price refuses to budge!
The impatient investor will be seething – hand hovering over the phone to call his broker and dump the stock.
That impatience can almost guarantee the stock will start moving the minute you sell it!
In a similar scenario, you’ve completed a value analysis
of a company.
But the price remains too high to purchase. You must exercise patience rather than rushing in to buy the share at the higher price.
The patient investor will reap the long-term reward.
Sometimes you can only blame stupidity
In the time you’ve been investing, there are probably times you’ve made a financial decision, then thought “No, that was stupid!” just a couple of minutes later.
The emotion that motivates this ‘stupidity’ is likely to be fear
, impatience or a mix of the three.
You have your ‘stupid’ moment when you realise your decision has been driven by one of these emotions.
The most important aspect of building a strong and solid portfolio is to learn from your (and other investor’s) mistakes. And not to repeat them.
By doing this, you’ll fall into the realm of the ‘smart’ investor. This is exactly where you want to be.