Have you experienced buying stocks when the market has just made major advances or the counter has just moved up higher? Only to face the selling down the next couple of days? Well that must be a lot of of regrets there. Well, the consolation is that you are not alone. I frequently made the same mistake - huh, talking about not making the same mistake twice. This is one monster inside of me that is so difficult to kill.
So often, I had forgotten about the commonsense of waiting for market to pull back before entering. This kind of emotion arose from a mixture of fear and greed. Greed in wanting to chase the profit and fear is worrying that the price may go beyond comfortable purchase level. On the hindsight, this is so silly. Pure silliness and nothing else. How many times you have read in the book about where to enter and when to exit. All the theory sounded so simple and logical. But, when at the thick of things, the price movement in the market can be so powerful and dominating over your emotion that you can forget about any theory you had learned.
Being impatient is the main reason for being poor. Generally, poor people are impatient. They look for instant results and instant gratification. Most rich people who build up their own wealth (I am excluding those who inherited wealth) are very patient. They think long term. The invest for long term. When they do business, the think of long term customer relationship instead of hit and run business. They delay gratification to invest into their business. That's how they grow fast.
I draw that similarity to investing. Exercising patience is an important aspect of investing or even trading. Waiting for the right moment (that what Warren Buffet does best) to enter the position. It makes great difference. Imagine you want to buy a stock that pay $2 dividend per share annually. There is great difference when you buy it at $50 and when you buy it at $20. The company and business may be the same but the market condition may have cause the price to be depressed or the price to be over valued.
So often, I had forgotten about the commonsense of waiting for market to pull back before entering. This kind of emotion arose from a mixture of fear and greed. Greed in wanting to chase the profit and fear is worrying that the price may go beyond comfortable purchase level. On the hindsight, this is so silly. Pure silliness and nothing else. How many times you have read in the book about where to enter and when to exit. All the theory sounded so simple and logical. But, when at the thick of things, the price movement in the market can be so powerful and dominating over your emotion that you can forget about any theory you had learned.
Being impatient is the main reason for being poor. Generally, poor people are impatient. They look for instant results and instant gratification. Most rich people who build up their own wealth (I am excluding those who inherited wealth) are very patient. They think long term. The invest for long term. When they do business, the think of long term customer relationship instead of hit and run business. They delay gratification to invest into their business. That's how they grow fast.
I draw that similarity to investing. Exercising patience is an important aspect of investing or even trading. Waiting for the right moment (that what Warren Buffet does best) to enter the position. It makes great difference. Imagine you want to buy a stock that pay $2 dividend per share annually. There is great difference when you buy it at $50 and when you buy it at $20. The company and business may be the same but the market condition may have cause the price to be depressed or the price to be over valued.
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