Investing Tip:

Doing the Hard Things

I was reminded recently of JFK's speech about the US going to the moon, saying that we choose to go the moon and other things "Not because they are easy, but because they are hard". There is a real investing lesson there. It's important to do some hard things if you want to be a successful investor. What hard things? Here are four of them:

  1. Making emotionless decisions about your investments. We all have feelings about stocks, good and bad. But those feelings have no place in making decisions about which stocks to own. It's hard to ignore those feelings, but very important.

  2. Selling when everyone else is buying. It's hard to be on the sidelines when everyone else seems to be making big money. It's especially hard when you've sold a stock and it continues to go up. But when it's time, it's time.

  3. Buying when everyone else is selling. This is even harder. It's scary to be buying when everyone else is getting out of the market. What do they know that you don't? But this is how the big money is made, buying stocks in *profitable* companies when everyone else is jumping ship.

  4. Doing nothing. Probably the hardest thing of all is to watch the market gyrate up and down and watch your stock up 10% one day, down 10% the next and do absolutely nothing. But in the long run, with a good stock, that's what you do, is nothing, for many years.

Hard to do? Yep. And none of us are perfect. But doing those four 'hard things' most of the time will put you way ahead of most investors.

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Donald Steinmann and Advanced Financial Management assume no responsibility for any actions taken due to comments made in The Investment Tip of The Week.

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"A good decision is based on knowledge and not on numbers."
-- Plato