Whether we want to admit it or not, we’re all emotional investors.
Only a computer doesn’t get excited when a stock that was bought a year ago has doubled and is hitting new highs.
But it’s how you control your emotions that count. Some investors are famous for having stomachs of steel. They’re able to ride the ups and downs of the stock market seemingly unaffected by its gyrations. They keep their emotions completely in check.
Warren Buffett has famously said, “The best time to sell a stock is never.” He has owned some stocks for decades.
For most of us, though, it’s a different story.
I’ll admit, in the 2008 carnage I couldn’t take the seemingly endless losses in some of my industrial and metal stocks. My emotions took over so I sold.
Four years later we know that was the wrong choice. If only I had just resisted my emotions and followed the fundamentals.
I also jumped on the bandwagon of “hot” stocks during the dotcom boom. Being an emotional investor at the height of that bubble wasn’t all that bad (as everyone was doing it and making money off of it.)
But, again, if only I had followed fundamentals, instead of emotion, I might not have gotten caught as badly in the dotcom bust downdraft.
How many times have your emotions gotten in the way of your investments?
Got any tips on how to resist the urge to sell (or buy) at the wrong time? (Not looking at your portfolio for months, notwithstanding.)
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