Make Money: Investing and Your Emotions

A couple of things have to be in order before you start investing, top of the list are your thinking and emotions.

Get your thinking and emotions in order before you starting investing in the stock market or else you will lose money and may not recover from the experience.

I always listen to the radio on Saturday mornings when carrying out house chores. The show on this Saturday was about investing in the stock market. As is always the case the host had an expert on board to talk about investing, answer questions and advice people on what to do.

The show I thought was a good idea and was obviously something people were interested in judging from the number of listeners who called to ask questions. However, I was not impressed with the adviser, his language was technical and he didn’t really answer callers in a way they could understand. I would say he forgot to think of his audience, that they were not investors and would not know what “yield” or “dividend” means.

Anyway, what came out of the show was something I agreed with and had experienced first hand, and that was, how you thought and dealt with your emotions. As you probably know if you have been reading my articles, the way you think affects how you act. Your emotions also play a big role because if it is not set right and controlled you can find yourself making rash decisions.

I remember my early days investing in the stock market, I invested without thinking, I didn’t know what made the market move up and down. I also didn’t consider my emotions – greed, fear, excitement. All of which were more important that the actual price of the stock I bought or sold.

Take Apple Computers for example. When news came out that the Beatles were suing Apple Computers, people thought of the repercussions and fearful Apple Computers might loose the case, they decided to sell their shares in the company. When other people heard Apple shares are being sold, they too in fear decided to sell, which eventually pushed the price down. Forgetting that the facts did not change, Apple was still a good company and their products were loved and bought by millions everyday. What moved the price was fear, not a bad product. The same process moves a share price up.

You see human beings run the stock market, and they like you have emotions and it is your emotions and theirs that moves the market. The chances of making money investing in the stock market therefore hinges on you thinking and acting independently, having a plan and sticking to it, leaving no room for emotions only facts.

You will be burnt (lose money) if you ignore this fundamental point. My advice to you, sort out your thinking, understand and control your emotions - especially greed and fear - before you think of investing in the stock market. Remember you make money by thinking.