Most investors say knowing when to sell is much harder than knowing when to buy. I believe this is because of the two main drivers of investment mistakes – fear and greed – are more easily felt when you own an asset than when you don’t.
Don’t let emotions get in the way
Buying a new share is a bit like starting a new relationship – full of excitement and optimism about the future. However, once you’ve owned a share for a while, it’s not uncommon to feel disillusioned if the price hasn’t performed to expectations or, if you’re in the money, to want even more. Sometimes, even if they’re making excellent profits, investors will begin looking around for something even more attractive.
Both fear and greed make investors either sell too soon or hold on too long. Falling in love with a company – don’t laugh, it does happen – will only leave you with a broken heart eventually.
Removing emotions from your investing
I’ve always maintained the only way to invest successfully is to eliminate emotions from the decision-making process, and that’s what my 9 Key Assessment Criteria and associated tools are designed to do.
Using these tools, I apply the same objective criteria to each company I assess, looking at whether it’s likely to exceed or underperform against expectations over the next 18 months. Where I see a good opportunity, I act on it and stick with the plan until I see information indicating it’s time to alter the course.
By applying pre-determined, objective criteria to your investment decisions – putting your head before your heart – you too can experience more happy smiles than broken hearts in your investment journey.
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