Dec 112006

As some of you know, a few months ago I bought stock in a company. Since that time, I’ve got a ~54% return. That means that for every dollar I invested, I’ve made fifty cents.

Now, as a rational investor, I know to keep my emotions in check to make sure I don’t make emotional and rash decisions. This usually means ignoring the pain of having a paper loss (that is, the stock goes down but you still own the shares –not a real loss). And, for me, this also includes reigning in my enthusiasm at making that gain. That sort of euphoria has many effects on my rationality, but I think the largest one is illustrated by this saying: "It is winning, not failing, that makes people care." And when you start caring and your ego gets involved…Well, it’s not stuff I like to face.

So I almost crush my enthusiasm, but being pessimistic. I got lucky. Which is true, I simply stacked the odds in my favour. There was no extraordinary skill used here.

However, I dealt with an emotion earlier this evening that I didn’t think would come up. Regret. Many of you know that I do not care for regrets and it has been a bit of a bad day for me in terms of controlling my emotions, so regret came up. I regret that I didn’t put more money into that stock (I put in all I had, so obviously this is irrational). Then I became frustrated that I hadn’t had more to put into the stock. All of this seems to stem from my goals of financial independance and how it feels like I coulda got it, if only I had a bit more capital. If I had invested a hundred grand, I would have 50,000 dollars right now. But I have nowhere near that. *Sigh*

I am feeling much better now (having gotten my emotions under control again). However, I write this as an illustration of something you might face, should you choose to follow the path of investing to become wealthy. It’s very important to keep your impartiality and your rationality. However, knowing a bit about where you’re going to be coming under attack by your own emotions helps you to counter them. Knowing is, truly, half the battle.

  One Response to “Investing”

  1. Remind me to ask you what your stand is on controlling emotions. Good Luck with stocks.


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