Trade The Journey

Trade The Journey

Proper Investor Psychology!

Tapping into your psychology for investing can be beneficial and help to provide clues on what investments may work best for you. There are various investments available from bonds to futures depending on your risk tolerance and your appetite for continuously deciphering evolving market movements.  In fact, your investor psychology is quite reflective of your perspective on life in general. The market is complex and requires you to be objective about its performance and also in your analysis.

A beginners mind is needed to adapt to the changes involved in investing.  A beginners mind requires you to adopt the mindset of a consistent learner and a thought process that reflects “maybe and how so” rather than “I firmly believe it to be so”. Unfortunately, investing and psychology is completely separated by investors in terms of thought and practical application.

Investing to me has become less about the numbers and more about the psychology behind the numbers and how fluid I can remain in my evaluations. Almost anyone can look at the numbers and come up with a conclusion about the investment that can be more or less accurate depending on their experience of course. But do you believe in what you have concluded in your stock evaluation? Is what you believe about the future performance of this stock in line with your analysis or your gut? or both? Do you have your own investor tenets and beliefs?

What is your process for re-evaluation of your stock selection? Do you believe the stocks you selected need re-evaluation?

The great investors as I am learning are masters of their psychology, their natural inclinations (bias) as human beings and are fully aware of the reconditioning that must take place to become a great investor. If you are an astute observer of life and its many facets you will see that most things are the opposite of what you believe they should be.

Investing is one of the easiest markets to enter, with the lure of instant profits and immediate results but that could not be farther from the truth. To truly become an investor, you must become intertwined with the market with an almost intuitive sense of how the market operates and how the companies you select must maneuver in the market to become profitable. A patient but an active participant.

I have lost my fair share not only based on faulty analysis but entering and exiting at the wrong time. Be forewarned about the difference between an investor and speculator/noise trader. Investors are skilled participants who have an understanding of their psychology but more importantly the psychology of the market. They are intertwined with the market movements and able to make decisions intuitively. Noise traders are intertwined with popular opinion and are slow or unable to notice when the market is signaling a movement. Popular opinion is often several steps behind the market, buying too high and selling when too low. This is more of the norm than the rule.

Observing how you reactive and proactive you are in life, in general, can be a good predictor of your psychology and possibly the changes you need to make to become a great investor.

Thoughts?

 

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