In stock investing; temper your excitement
Warren Buffet framed it well and he said; ‘Investors should remember that excitement and expenses are their enemies. And if they insist on trying to time their participation in equities, they should try to be fearful when others are greedy and greedy when others are fearful’.
This only means that investors should check his feelings and emotions and let those emotions stay at the door. Though it is never our fault to get and get new stocks, it is imperative as well to know this weakness of ours and take concrete actions to have these emotions stay at bay. So it pays to be not greedy when everyone is greedy, and it is good as well not to be fearful when the stock market and the rest of the investors are fearful. It is important that we take advantage of the situations; be greedy when others are fearful and be not afraid when others are fearful. So it is suggested that we conduct ourselves according to the idea in conventional economics that we need to act and decide rationally, balance the positive and the negative sides of the business mode and thru that the most informed decisions can be made.
New investor in the block relies heavily on knee-jerk reactions. For example if the owner of one portfolio has suffered a major setback in the market, then the natural move is to view the recent setback in the framework of loss and he sells. But after the sell has been made, he now sees the same portfolio from the eyes of the new buyer and sees the potential in the portfolio. This kind of framing error usually costs some new investors their sizable amount of money. This is the reason why it is suggested that investing decisions should be carefully planned and investors shouldn’t rely solely on emotions.
But it should not be understood that emotions in business is all negative. Emotions and reason should always go hand in hand.
