Allykat's Tales
In theory, stock markets have always performed better in terms of return potential than other investment vehicles. However, with these greater returns, there’s also the potential to lose one’s investment capital as well. Therefore, to ease out the bumps on the road, one should always have a long term view when it comes to investing in the stock market. That way, with long term stocks, the temptation won’t be so great to sell, even if you’re holding onto potential winning stock picks.
Having patience and a long term investing approach is preached by a lot of financial experts but it is easier said than done. After all, it’s hard to separate yourself emotionally from your hard earned dollars. And yet, that’s what you must do if you want to make money in the stock markets. You must be objective and stay the course of your investment plan. When you’re emotional, you make rash decisions and that goes for buying or selling. If the hype surrounding a company is high, you might be tempted to pay more than what a stock is worth. Conversely, if the news is bad, you might be tempted to sell due to overblown panic.
The key to making money in the stock market is to play the contrarian. Famed investor Warren Buffett summed up the contrarian way of investing by saying: “Be fearful when everyone is greedy and greedy when everyone is fearful”. Therefore, you must have guts in your conviction that what you are doing is right. And how do you do that? By having done your research in a company based on cold hard numbers devoid of bias or emotions.
There is no doubt that lots of people make money on market swings and consumer sentiments. However, people lose a lot of money too. Instead of watching with bated breath how the market is going to react day to day, wouldn’t you rather take a long term approach to investing and sleep soundly at night? Be the contrarian in your investment strategy based on research and let everyone else catch up to your way of thinking.
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