Tags: wrong | thinking | investment | failure

Wrong Thinking: The Biggest Contributor to Investing Failure

By    |   Saturday, 14 February 2015 11:58 AM


Someone once asked me how I find topics for my blogs.

It often has to do with what’s going on in the world, some certain economic event or a move in a specific asset class, etc.

But other times, it comes from talking to my family, friends, acquaintances and subscribers.

A subscriber recently contacted me on social media and mentioned being up on his stock one day and the next day, the market gave back those gains.

I told him that it’s futile to look at your investments on a daily basis.

Why? We’re investing over at least 18-24 months.

I told him that watching “true investments” on a daily basis is like a farmer digging up his seed each day to see if it’s making any progress.

We all know how unproductive that would be.

People do the same thing with their investments.

Even as a newsletter writer, I keep a sharp eye on all of our positions, but I don’t go into my own personal account that often. Why?

I follow the same rules I teach my subscribers.

I know that if I allowed myself to open up my trading station each day and watch the balances gyrate, before long I’d be very worried.

I’ve learned from experience to let investments truly be investments and not to treat them like “trades.”

It’s futile!

If you own a home, the value of your home fluctuates regularly. Each week or month, the value of your home changes. Why aren’t you getting online each week and seeing what it’s worth?

But that’s different, right? After all, you’ll live in it at least four to five years and check on the value again when you’re considering selling the house and moving to another place.

Well, learn to treat your stock investments like you do your home. Enjoy owning a piece of these companies just like you enjoy living in your house.

Guess what? If you looked at the value of your home each week, you would likely stop enjoying living in your house and you’d worry about it all the time. You might say things like, “Oh my gosh! A couple of months ago, this house was worth $40,000 more and now it’s worth less!”

Here’s the thing. If you focus on the near-term, you’ll get overly emotional.

And what do people do when they get overly emotional?

They make bad judgment calls.

Don’t believe me? What happens when you get angry?

You say things you shouldn’t. Later when you’re of more “sound mind,” you apologize.

When people get emotional about their stocks, they make rash decisions which are usually poorly thought-out decisions which have very little to do with logic and a whole lot to do with how they “feel” about the stock at the moment.

How you feel about a stock and what it will do in the future have nothing to do with one another. In fact, if you’ve been investing long enough, you probably have freaked out and sold a stock only to later see that same stock soar to the upside.

That’s why, when we invest in a stock in the Ultimate Wealth Report, it’s not based upon any “feeling” I have about the stock. It’s based on fundamentals.

If they are a huge company, have a lot of cash on their books, have low debt levels, are making a lot of money annually and trading at a cheap valuation relative to their earnings, then I’m going to buy the stock.

If the numbers aren’t favorable, it tells me either that the company is not solid OR that it’s trading at an unfavorable price relative to its earnings. And in either scenario, that stock will never see my money.

Why? It doesn’t make fundamental sense, so I avoid the stock and move on to the next one that does make fundamental sense.

If a stock I buy declines quite a bit on me in the near-term, I don’t freak out.

I simply pull up the fundamental data on the stock. If the company is still solid fundamentally, then I stick with the stock. Only if something changed materially with the company’s fundamentals would I sell.

Either way, my decision is based on hard data and not emotion.

In other words, I have a consistent measuring stick to use which doesn’t change if I got up on the wrong side of the bed that day, or wasn’t feeling well or if it was an emotional day for me.

It wouldn’t matter.

My actions would be no different because I’ve convinced myself that the fundamental data trump how I might “feel” about a stock near-term.

So if you’re an investor that has gotten into the habit of checking your stocks intra-day, daily, etc. I’d encourage you to break that habit. If they’re "true investments," then you’re holding them for a year or for many years.

Investments need T-I-M-E to appreciate! Why? A stock sustains a higher price level because a company’s earnings goes up to a higher level and thus makes the company worth more as their earnings power increases.

Well, how do their earnings increase? They have to have the TIME enough to sell more products or services in order to increase their earnings.

If you don’t give your investments time, you’ve done yourself a disservice. You’ll end up selling at the wrong time and you won’t likely end up a successful investor, long-term.

However, if you take heed to what I’m teaching you about today, you have a HUGE chance of becoming successful in your stock investing, over time.

God bless!

About the Author: Sean Hyman
Sean Hyman is a member of the Moneynews Financial Brain Trust.
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If you don’t give your investments time, you’ve done yourself a disservice. You’ll end up selling at the wrong time and you won’t likely end up a successful investor, long-term.
wrong, thinking, investment, failure
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2015-58-14
Saturday, 14 February 2015 11:58 AM
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