Stock market is unforgiving. You can lost your hard-earned money at a blink of an eye if you are not careful. Making it into a guessing game is a recipe of disaster. Buying something because it feels right is not enough criteria to shell out your money on the stock you picked.
Why did you buy those stock shares? The answer to this question needs to be solid. Otherwise, it is better off for you to keep your money.
There are two school of thoughts in investing – fundamental analysis and technical analysis.
Fundamental analysts believe that stock price of the company follows the financial well-being of the company in the long term. They based their decisions mainly on how the company is performing financially.
Technical analysts believe that the stock trend (stock price performance through time) is a reflection of the behavior / psychology of the investors. They based their decisions on the price trend to time and predict the response of the investors.
Emotional investing? It is like investing blind. No basis.
Cut your loses short. Heard about this?
There will be times, when our initial assessment is wrong. It is possible that the variables considered during the stock analysis have changed. It is also possible that the analysis was wrong.
So what do the savvy investors do?
They pull the plug and cut their losses short. In layman’s term, they admit they are wrong. Sell the stocks as soon as possible before the stock prices go even lower. They do it to cut their loses.
Emotional investing can be costly because it makes you fall in love with your investment. You think that the investment is correct. You keep on holding on hoping that someday the stock price will bounce back. Bad the sad truth, there is no someday.
You need to follow a system. System can help you invest without emotions. Whether you do fundamental analysis or technical analysis, it is up to you.
For my part, I am following a SAM (strategic averaging method) by Truly Rich Club (TRC). The catch, TRC has a monthly subscription fee.
But with that small subscription fee, you can protect yourself from becoming an emotional investor. It is a proven system that helped me earned from my stocks many times over.
Got questions, suggestions, recommendations or clarifications about Truly Rich Club or about stock market? Just add them in the comments. I’ll do my best to help you.