Friends and Enemies: What Helps and What Harms Our Investments

What makes great investors successful? What helps them set the things the way they earn money whereas others lose? The main reasons for any fail or success are inside yourself and it is vitally important to identify what helps and what harms your profits. So, what are these things and what is the key of successful investments?
What would be your reaction if the market would suddenly start to fall? All the parts of your portfolio are 5-10% or even more down just in days or even hours. Practice tells us that generally, this case forces inexperienced investors to sell everything and to exit with huge losses. What is laying behind this? First of all, a huge fear of losing money. The second point is they simply don’t know what actually influenced the fall. Our strongest emotion makes us act irrationally. Fear is your enemy in investing. What is your friend? Independence of decision (understanding the true reasons of the drawdowns, ignoring the general rush, cool-minded decisions) is your true friend in multiplying your capital.
The next bad thing that can flush into a toilet all your investments is overconfidence, or in another word – overestimation of your own competences. There is some good news for investment rookies considering this issue: to some extent, they can be more successful than experienced traders. The whole thing is in the perception of own experience: experts usually tend to overestimate the probability of their prediction, whereas rookies evaluate their own predictions more carefully. The stock market is a very fluctuating thing, where everything can happen. The greatest investors spend plenty of time on the expertise of the stocks they are going to buy with a cool head. As for me, self-criticism is your friend in the world of investments, it may help you to go through the jungles of false conclusions and judgments and hence – to prevent losing money. Respectively, overconfidence is your enemy.
Have you heard anything like “30% yield for the first year!”, or “Investing is easy money!”? This is total bullshit. Such the messages are aimed at your greed – another your real enemy. With the greed, investors become like the slots addicts: bringing their money and hoping for luck. Of course, in the short term, one can have a big luck, but this is the strategy of a loser in the long term. What is your friend? Again and again, I say cool mind. In this case, it is expressed via investing strategy. Developing the strategy for the long-term and short-term investment and sticking to it, whatever happens, may seem inflexible. But in the process of developing this strategy, you evaluate all factors and estimate all the risks. You simply get more insights about every sphere that you are planning to invest in which means you will have more competence to look into real reasons for any event on the market. Planning, building up the investing strategy and acting according to it is your friend.
Get ready that investing will not bring you a fortune in the first week. First, as it was recently mentioned, you have to develop strategy and set a realizable goal. What yield to set? Well, try to beat the bank. There’re clever people in the banks. If they give you 9% yearly, try to beat them – get 10%. Considering the fact that one of the most genius investors of our days, George Soros, reached the profitability of 20% yearly, 10% is more than good.
Collaborating with the friends and banning the enemies will help you avoid the rush and ill-considered decisions and will make your investing more reasonable. Reed more.

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