Pulling the Investment Trigger: Don't Be Afraid
Pulling the Investment Trigger: Don't Be Afraid
By Dr. Steve Sjuggerud, President, Investment U
Thursday, January 30, 2003: Issue #209
"Steve, I like your latest investment recommendation in your February newsletter, but I'm afraid"
"I see that it had fallen recently up until your recommendation, and I'm afraid it could go down after I buy it too." That was my mother-in-law's comment about my latest recommendation.
Of course, in previous months, she's said, "Steve I like your latest recommendation, but I'm afraid I see that it has gone up recently until your recommendation, and I'm afraid I've already missed it."
My mother-in-law is not alone. I hear this every month from readers, many of who have done a ton of homework on their own to validate whether or not they're going to buy my recommendation. In nearly all cases, they'll say to themselves, "I'll just watch it for a while." Watch it for what?
What are you watching for? If it goes up, they say, "Now it's too late." If it goes down, they'll say, "I'll buy it when it starts to recover." This, my friend, is not a successful investment program. This is called being afraid to pull the trigger.
You Don't Make Money By Watching
One sure way to never make money investing is to never invest. You don't make money by monitoring investments. You don't make money doing more and more homework that may eventually lead you to miss an opportunity. At some point, you've got to pull the trigger. You've got to buy. And then at some other point, you've got to sell.
Dr. Van Tharp, the Founder of the International Institute of Trading Mastery, has done the most work in this area that I'm aware of. His descriptions of what causes people not to pull the trigger and ways to combat it that appear in his Peak Performance Course - in the book called How to Control Stress to Become a More Successful Investor - are excellent. I was just about to go through that book, when the answers miraculously appeared in my e-mail inbox this morning. Van had sent out a free e-mail entitled Stop Worrying Yourself out of Profits, excerpted from his Peak Performance Course.
"Much of the experimental research on worry has dealt with a common problem of students-their concern about performance on an examination. Students who worry about test performance are likely to do poorly compared with students who are not concerned.
"The investor who cannot sleep well because of his concern over possible negative consequences will perform as poorly as the worrying students. His ability to forecast price movement or select good investment opportunities does not matter. His constant worry about his performance ensures that he will not achieve optimum results.
"Worry takes up precious processing capacity. When you worry and take up capacity, little remains to perform more important tasks such as investment decision-making. Worry takes away from your ability to pay attention to what is really going on in the market."
Changes You Can Make To Overcome This Handicap
The inability to pull the trigger is quite likely significantly related to your worries - many of which you have created in your own head. I can't solve those problems for you. But you've got to make some changes. Here are a few suggestions:
1) Stop worrying about the possible negative consequences of a decision. As we all know, the stuff we spin our wheels worrying about quite often never comes to pass.
2) Recognize that it's okay to take a loss. The most successful investors take losses on 60% of their trades. Their winners are just bigger than their losers. Losing small battles is part of winning the war. You've got to accept that losses are part of winning, and that you're okay with them, immediately.
3) Remove some of your market stress by taking less risk. Buy a smaller position than normal. Or don't buy risky stuff. Reduce your worry by reducing how much risk you're taking.
4) Commit to a lower stress lifestyle. You know, eat right, exercise, and all that stuff. You will be better equipped to handle your worries and you'll live longer to boot
5) Recognize that your self-esteem has nothing to do with your wealth or your investing success. Part of learning to get better at something is getting knocked down, dusting yourself off, learning something from the experience, and getting back in there to do it again. As long as you learn something, and get back in there, you're a winner.
Ultimately, YOU have to pull the trigger. You can't know everything about every investment you make. You may find the Next Big Thing, only to get "WorldConned."
Remember, the surest way to guarantee that you'll never make money investing is to never invest. Stop worrying. Do your homework, make a decision, and pull the trigger.
You'll be a happier, and wealthier, investor.
Today's IU Crib Sheet
- I'd like to thank Van Tharp for all he has done in this area to help me become a better investor. If you're seriously interested in investing some real time into becoming a great investor, you might want to check out his Peak Performance Course.