I thought about writing this quite some time ago but it just didn't happen. I've encouraged almost everyone that has been close to me to INVEST. I'm sure I've instilled some knowledge to some people but somehow people feel that investing is risky and never take the first step.
This so called "theory" I thought of many months ago has actually been affirmed by this speaker who came to Taylors. Mr. Ooi Kok Hwa who writes an article about investing every Wednesday on The Star came to give a talk. And the very next day, he wrote a column titled "Control your greed and fear".Click image scan to enlarge above. I was very surprised, greed and fear were the exact words I always thought about.
In this post I will share with you some experience I went through and explain MY theory why people do not invest. My experience is very limited but its growing and I feel it would very appropriate to help out others in this are of great importance in life. I always tell people, INVEST!! But I realised there's always a barrier that prevents people from investing,I do not blame anyone because I've found out why!!
The title Composed Investor was created by me in the shower. I kept thinking what title to put up. But after recalling Benjamin Graham's "Intelligent Investor", I've come up with this. In this post I will share with you the Human side to investing, not telling you what shares or equity to put your money into. 1st theory, COMPOSURE WINS. We all know that but sometimes we lack the composure when we deal with tough situations.
In everything we do today, if we are composed or a simpler word, calm, we usually win. It's very true when we relax we usually do well. But to achieve the level of composure we require, we first need to fulfill the CONFIDENCE level.
GREED AND FEAR
A big reason why people do not invest is definitely not because they don't have the money. It's the greed and fear that takeovers the mind and not allowing it to think the way it should. I call this STEP 1. If you don't pass it, you most likely wont' succeed or invest. People do not pass this step because
1) THEY FEAR THEY WILL LOSE THEIR MONEY
2) THEY ARE WORRIED THEY CAN'T FIND THE BEST INVESTMENT (GREED)
I just gave you the main point about my so-called theory. When I first started investing, these 2 elements clouded my mind, making me so fearful on what instruments or field I will be investing in. I HAVE experienced this. A hypothetical situation for new investors, when we buy a share at $5, the biggest fear and disappointment would be the share falling below $5. We will take this as we have "lost" or would be thinking "I shouldn't have bought it at $5".
That is the biggest problem. We thought we have lost our money but we didn't know the biggest lesson awaits us. LEARNING FROM OUR MISTAKES. Like Rich Dad said, we learn by playing. DO NOT BE AFRAID OF LOSING MONEY because it is the ULTIMATE way of succeeding in investing. Make the errors early and fix it immediately. Then you will be able to invest with the composure required.
The 2nd element, we always hope to buy things at the lowest price and sell it at the highest. This is the theoratically the best way of making the most money but in real life we must take it as we can NEVER buy at the lowest and sell at the highest. This is GREED. I have experienced it too FYI. I couldn't sleep for so many days last time when it became true I was buying at a rather high price. I was thinking to myself "Damn it, why didn't I wait a little longer". In truth, we will encounter these situations and blaming ourselves for not maximising return. But as I said it will NOT HAPPEN. Never blame yourself for bad judgment as long as you think you have done what was right. Market forces determine the outcomes of the market not YOU and thats why you have to very careful about what the market thinks.
SOLUTIONS
I always believe in solutions and you are pretty lucky to be reading one FOC. How to overcome fear? Do your homework. Quoting Rich Dad again, "You get rich at home not at work". I totally agree. I would love to explain to income diagram he described but I don't think I will. How to do your homework? Read, read, read and read. It doesn't matter where you get the business section from, just read it!! That's your homework. Read and understand what affect the financial markets. Analyse what is written and make your judgment.
The greatest solution. DO IT. DO IT. DO IT. There's no better way of learning to ride a bike than actually doing it. Afraid of losing money? I tell you what. Set aside maybe $1000 and invest. What's the most you can lose? $1000. What you will learn, invaluable. When we do it more often, we gain confidence and we will gain more composure about things. We will be less affected by what the "Broker's Call" column says, Top Stock Picks column or what your friend tells you to buy. You make your own decisions because YOU CAN AND KNOW HOW TO. When you cross STEP 1, the path to choices and options in life will broaden. Start investing now!! Post queries if you have any.
Be Fearful When Others Are Greedy and Greedy When Others Are Fearful - Warren Buffett
~deyao~
