Saturday, January 15, 2011

Fear: Investor Enemy #1

Fear plays a big role for many investors.

An investor's experience can be terrific, but it can be really bad, too.

For most people, the experience is average. Being honest, I'm guaranteed to be right about that, by definition.

However, my goal is to help people be BETTER than average investors.

One way to do this is for me to identify how many average investors think.

Fear is one of the biggest reasons that people fail or never really do anything exceptional. This also applies to things beyond investing, by the way, but this piece is meant to discuss investing.

Many people are blinded by fear.

They have a fear of losing money. They are so afraid that they miss great opportunities.

They fear having to pay taxes. They don't sell when they should, because they don't want to pay taxes (which often cost less than their subsequent loss).

They fear that they will miss tomorrow's better deal (of either buying or selling). They wait until tomorrow--they say--except that tomorrow is always tomorrow and never becomes today. They are afraid that today's great deal isn't really that great. What if it is even better tomorrow?

Truthfully, I know these, because they go through my mind, too.

Let fear work for you.

Sometimes, it is good to be fearful.

Actually, fear can be a good thing. It forces you to think.

There are times when fear causes you to ask yourself enough questions to avoid doing something foolish.

Do not let fear work against you.

Fear can keep you from doing something inadvisable.

However, once you've done your thinking, and your figures tell you to do something...DO NOT LET FEAR PARALYZE YOU.

That's right! Fear can paralyze you!

I can speak from my own experience about how I figured something. Later I would watch and see the entire thing unfold--just like I expected it.

Did I get rich from it?


I let fear keep me from TAKING ACTION on it.

What separates me from many other investors?

I do quite a bit better than a lot of other investors.

To be honest with you and myself, I'm not really smarter than most of them. I seem to know fewer things about the stock market than most other people who are involved with this.

How do I do better than most of them?

Fear paralyzes me less often than them.

When I do well, I see a situation, and I have the guts to act on it. Better put, I have the guts to trust myself and what I see.

Don't take foolish risk, but don't be foolish and ignore opportunity that is clear and obvious to you. Let fear protect you. Don't let fear be YOUR enemy.

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