How to combat greed and become a more successful investor

Fsp Invest, 03 Aug. 2013

Tags: greed, combat greed, investor, successful investor, how to combat greed, buy after the fact, follow the crowd, discipline, use a trading system, use trading rules

Greed is one of the main driving forces of the stock markets. But, if you allow it to sway your investment decisions, you could end up throwing good money after bad. Read on to find out how to spot greed interfering in your decisions and how you can stop it…

Greed can have terrible financial consequences on your investment portfolio. And it’s very hard not to let greed affect your investment decisions.

Examples of greed affecting your investment decisions include buying for a quick profit and holding onto a share regardless of the cost.

Here’s another example of when greed stands in your way to investment success, explains Gareth Stokes in Fear, Greed and the Stock Market

Don’t let greed let you “buy after the fact”

This is also known as following the crowd.

At the height of a market rally, the papers are full of bullish sentiment. Everyone you speak to has made money in the markets – your friends, your neighbours, even your pool man!

Greed will force you to enter the market because it won’t allow you to ignore the fact that others are making ‘millions’ while you’re sitting out of the market.

Greed and the allure of cold hard cash will win out in the end, and you’ll enter the market too late.

You’ll follow the herd instead of leading it and enter the market just before the crash!

The best way to fight the ‘greed’ effect

So what can you do? How do you ensure that this emotion doesn’t wreak havoc with your investments?

The best approach to the problem of greed is to realise there is no cure for it. Greed will always exist in society and it will always exist somewhere in your personal psyche.

You can’t pop a pill to cure greed so you’re going to have to learn how to trade around it.

You need to use self-discipline.

You have to apply a disciplined trading strategy and create a set of rules that you stick to, no matter what.

Provided you don’t bend any of these rules you’ll never be affected by greed when you trade again. You should leave no place for greed in your trading system.

Bottom line: While greed might still affect you emotionally, the emotionless rules in your trading system will simply cut it out!

Related QA

d.c.heger asked:
MY QUESTION IS – I bought Bitcoin & Etherium some time ago – at first they grew nicely but now they are lower than what I paid for them. Should I [read more]
Published at 04 Apr. 2018 in: Investing 5 shares due to rocket 1 Answer
kavesh.maharaj.73 asked:
Hi Josh. I would like some advice on TFSA. I can get an interest rate of 7.8% nominal at a bank if I invest the R33k upfront in a fixed deposit [read more]
Published at 19 Mar. 2018 in: Investing Tax free savings vehicle 2 answers
kavesh.maharaj.73 asked:
Hi Josh Quantum wants to buy back shares from shall investors at what I think is a low price of around R3.86. You tipped the share in February [read more]
Published at 14 Mar. 2018 in: Investing Real wealth 5 answers
elizastrydom asked:
Hi Timon I am interested in registering for your Red Hot Storm Trader service. I am already a Red Hot Penny Shares investor. My question is [read more]
Published at 28 Feb. 2018 in: Investing Trading platform and broker 1 Answer
ManuE asked:
I have an interest in investing in Bitcoin, I just don't know how. If I buy Bitcoin with R15 000, how much can make (Return On Investment)? [read more]
Published at 25 Feb. 2018 in: Investing Investment 1 Answer

Related articles:




Youtube Twitter Facebook

Connect with us:    

  • Accelerated Investor