Emotional Involvement

I'll bet with almost anyone that has stocks or mutual funds in his portfolio that he has losers, but he won't sell them because he "likes them" or some similar excuse. This is the philosophy of a loser.

You cannot become emotionally involved with anything you have bought whether it is stocks, mutual funds, collectibles, real estate, etc. etc. When you see the value of these things heading down it is time to try to salvage some of your money even if you have to take a loss.

I have seen people hang on to a piece of land (or a stock) for years just so they could get out "even". Believe me "even" is not even. Suppose you paid $20,000 for the land and it took you 8 years to find someone willing to buy it for $20,000. If you could have sold it for $15,000 and put the money in a money market account at 6% for 8 years you would now have more than the original $20,000 ($20,495). When you invest money in anything you cannot afford to have emotional ties to it. You must be willing to sell when the time comes. Most people don't want to sell for two reasons. They won't take a loss; however, the main reason is psychological - they don't want to admit they were wrong. When I was a broker I would watch people trade. Almost none of them were trading to make money although that was what they said. They were trading to find out how much pain they could stand from losing. They were trading for emotional reasons.

The difference between professional traders and a non-professional investor is the ability to divorce themselves from the emotions of the trade. Win, lose or draw the pro knows the risk and is willing to take that loss quickly if it should occur.

Emotional involvement in investing is one of the best ways I know of to lose money. You must be able to look dispassionately at your stocks, bonds and mutual funds and be able to sell them when they turn negative. Negative does not mean go to a loss. It may mean they are no longer making a good return every year with your money and it is time to move to some other stock or fund. You might have a stock that has doubled since you bought it, but that was 2 years ago and it has done nothing since then. Time to sell. Look at your annual ROI (return on investment) of each individual issue to determine if your money is doing better than the overall market or whatever your personal criteria might be.

Many years ago I heard how they caught monkeys. The hunters would drill a hole in a coconut shell just small enough so the monkey could fit his open hand through the hole. It was tied to a tree with a strong cord. Inside there was fruit and sugar. The monkey put his hand in, grasped the goodies, but could not get his closed fist out. He would not even let go when the hunter came to capture him. Unfortunately, there are many investors grasping at losing positions. Isn't time to let go of some of those stocks you have been holding because you "like" them?

Let go of those emotional ties. You will make more money.

Al Thomas' book, "If It Doesn't Go Up, Don't Buy It!" has helped thousands of people make money and keep their profits with his simple 2-step method. Read the first chapter at http://www.mutualfundmagic.com and discover why he's the man that Wall Street does not want you to know.

Copyright 2005

al@mutualfundstrategy.com; 1-888-345-7870

---

On Line Stock Trading: Small Cap & Micro Stocks Go Up and Down - How Can You Profit?

Success in small cap & micro cap stock trading like... Read More

Market Timing?

The recent criminal fiasco in the mutual fund industry is... Read More

Series 7 Exam

What is the Series 7 Exam? If you... Read More

How to Make Big Money Safely in Stock Market

(1) Stock Market is Tough Place to Make Any Money... Read More

Market Globalization

Just 30 years ago the stock market was a shadow... Read More

Trading Tips No 8: Picking the Best Stock Market Price

Carefully thinking through your goal as a trader is of... Read More

Will the Stock Market be Lower in October?

The stock market often closes a week in the middle... Read More

Market Experience of a Naïve Stock Operator

Sometime in the third quarter of 1997, someone told me... Read More

Trading Tips No 5: Stock Trading Curve Drawdown and Commitment

All stock trading and investing methods must deal with the... Read More

Race Horses and Mutual Funds

For years investors have been taught to look into the... Read More

My Stock - Right or Wrong

We all know the expression, "My country, right or wrong",... Read More

Evaluation I

An insane person cannot evaluate an insane evaluation system.As you... Read More

What is a Mutual Fund?

Ever wondered what is a mutual fund? A mutual fund... Read More

A Stock Market Investment Strategy

I feel that an investment strategy in the stock market... Read More

Emotional Maturity

If you are going to be a winner in the... Read More

Seecrets on Investment: Tired of Making Huge Losses in the Stock Market ? Part 2

Fundamental analysis.Fundamentals analysis says the best way to predict the... Read More

Play another Day

Money management starts with protecting your capital, realizing profits and... Read More

Stocks & Oil, Sat Jun 18th, 2005

Both the stock market and oil prices rallied recently, which... Read More

Valuation

Every day I hear from the "experts" on CNBC-TV and... Read More

Trapeze Artist - Swinging with the Stock Market

When we go to the circus we see a trapeze... Read More

Adding Funds

Someday you may want to retire and continue to live... Read More

The Surgeon General

The Surgeon General of the United States says that smoking... Read More

Invest, Be Wrong, and Make Money in the Stock Market

I have been trading for several decades and was an... Read More

Cash

How many people went to a cash position this week?... Read More

Emotional Trading

The single most expensive stock market trades are those made... Read More

Being Wrong Buying Stock is Okay

Being wrong is OK, but let's not carry it to... Read More

What Does it Take to be a Stock Trader?

It takes a total mental commitment to the task. It... Read More

Market Timing

Every broker and financial planner will tell you that you... Read More

Is the Stock Market for You?

Many people would like to diversify their portfolios to expand... Read More

The Skinny on Mutual Fund Investing

Mutual fund investing is a lot like Thai cooking. Everyone... Read More

My Neighbor Got A New Car

I don't know what kind it is, but I saw... Read More

Buy and Hold Investment Strategy

"Buy and hold" is one of the most heralded investment... Read More

The Seven Mistakes All Novice Traders Make and How to Correct Them

We learnt the following the hard way! If any of... Read More