Stock Investments: Don’t Trade with your Ego and Investment Myths

Stock trading and investments are no more like bird watching.

Definitely much more than few clicks of your computer’s mouse in to the trading screen.

Other day my beloved investor friend yelled to me that his so called balanced portfolios of stocks are too lazy to win.

Investments in stocks according to him are  like walking on the egg shells.

He got so frustrated in not catching the tune of the market most of the time.

In fact he attended so many boot camps on stock investments and analysis and shows enormous interest in reading so many books and reports and love to discuss on stocks and so on.

But he failed to see light in his balance sheet at the end of the day.

His sentiments are only the tip of the iceberg of average retail investors in the market.

He asked me why?  Of course I am not an expert to give the right answer.

And further quizzed to me are we living in some illusory cloud-cuckoo-land.

Can any one find a clear answer to this conundrum?

How? No more preaching and tips.

Read the following carefully.

Umpteen, books on stock markets and investments, stock market punters and pundits echoed in chorus that anybody who invests in a basket of blue-chip stocks and holds it for 29 years is bound to be a billionaire, right? Not in Japan.

The Nikkei index at the same level as it was in 1983, the value of the investment would be the same as it was 29 years ago.

The Japanese aren’t alone.

Stock indices of the European markets are down to 14-15-year lows.

Investors in the US and India are a tad better with benchmark indices at their 2007 levels.

With zero returns after all these years are we then compelled to think that whether the cult of long-term investing is almost dead.

There is something enduring about retail investor’s inability to meet some success in the stock market investments.I deeply thought  over it. It  would be interesting and necessary for me to probe some broader hypothesis behind this no cheer investors and their investments.

Beyond involvement of your hard earned savings and expectations, sentiments and ego plays a vital role in deciding the profit or loss curve in your balance sheet.

Further the retail investors on many times get trapped into many money and investment myths perpetuated by investment punters, professionals and media.

I feel strongly that the subject of money has always been and continues to be a taboo subject in our culture.

Today, psychologists and many financial advisors recognize that the key to financial success or failure in stock investments or in any business are not just a matter of good bookkeeping but of our mindset or mindfulness about the basis of our reaction to and dealings with money.

Therefore am I wrong or correct in saying that what is hurting the investor in stock investments are ego, psychology and sentiment?

Investors’ get hurt further to a point of no return when he reads about how corporate governance is ‘outsourced’ through equity research reports and not through Company’s annual reports and balance sheets.

 Now, who will bite the bullet?

Advertisements