| Interview with Jason of the Pragmatic Finance Blog This is the 20th in a series of interviews HelpYourMoney.com is doing of other personal finance bloggers. An Interview with Jason of the Pragmatic Finance Blog: 1. First, can you please introduce yourself and tell us why you started your personal finan. The Stock Market Investor’s Worst Enemy
Every stock market investor faces one primal enemy. An enemy so perverse, it will drive thousands of investors from the stock market through its ability to defeat even the most practiced investment strategy. Who is this enemy you ask? Your arch nemesis, in this case, goes by the name E. Motions…don’t ask me what the “E” stands for. Emotions are the driving force behind every stock market cycle. Quite simply, if they weren’t present in the stock market, investors could be reaping rewards based solely on the expanding or receding economy, and professional traders wouldn’t have any juicy profits from those emotional mistakes to grab. Here is an example scenario: Let’s say that you’ve done your homework, read the books, traded on paper, and now you’re making your fondest dream come true by investing in the market and making money! You maturely approach losses as part of the learning curve. You’ve experienced your share of them but your wins are still in the lead, thanks to the commitment you made of not deviating from your chosen strategy. Euphoria sits on your shoulder. One day, after 3 frustrating hours in traffic, you get home to find changes. You know that you should follow your strategy, but Stress and Greed are in charge. You’re buying and selling outside your strategy, but are confident that it will be ok – just this once. Now prices are dropping and Fear enters the room. Fear attacks every investor’s self-confidence with a voracious need for control. You spend sleepless nights listening to his mantra - you don’t know what you’re doing. Fear and Greed are now dictating the strategy. Self-confidence is on the critical list. Reason and Caution are under attack and are losing. You ignore the primary investment rule of buying low, selling high because you’ve lost too much and have to recoup. You close your eyes and dive in to recover your losses. “It will work,” says Greed on your right. “It has to work!” responds Fear on your left. Your partner has now entered the fray and is hounding you about the lost money. Your capital is almost gone. You erred grievously and invested money that you need now. Margin calls are being made. You’re out of control. While the components of the above scenario will change, the catalyst of this nightmare remains the same – emotions. You’ll survive the nightmare, but the experience will forever change you. Fear will shade every future stock market decision and severely limit your ability to objectively evaluate any investment opportunity out of fear that you’ll lose again. But, it doesn’t have to be that way. Developing a strategy to deal with emotions can give you a winning edge. Here’s how:
Remember, the key isn’t denying or curbing your emotions, but instead understanding how they impact your investment decisions and developing a strategy to work with them. *** You can copy and use this article as long as author by-line is included, and nothing is changed. Articlecity.com guidelines for using articles can be found here if you haven’t read them: http://www.articlecity.com/terms.shtml Delete this paragraph before using article. ***
This article was posted on November 14, 2004 How to Save MoneyThe key to learning how to save money is to figure out what you want from your life. Are you satisfied with being able to go out with friends a couple times a week for dinner and a movie, taking a vacation once a year and maybe one large purchase. Getting Cash Flow From Your Property! Getting Cash Flow From Your Property!
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