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Becoming A Better Investor

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Like religion and politics, money is a charged conversation piece in our culture.Nothing is as divisive as money; it is responsible for most domestic arguments and divorces.It can also leave friendships in shambles, which is why one should never loan money to friends and families.Because money or the appearance of money is so tied up in our very identities as Americans, decisions about money may be made with our heart or some other body part for men rather than our brain.That is why we keep up with the Joneses.We don't want anyone to think we aren't good or smart enough to make a huge bankroll.

Unfortunately, this emotional response to money, whether pride or through the idiom "sex sells," is what decisions about money least require.Jealousy at the neighbor's new boat should not cause us to rush out to get a boat, too, especially if we don't like boating.Good for the neighbor that they can foolishly spend money without thinking about the consequences.We aren't in the same... boat.
Financial decisions need to be made with a cool head and well applied logic, throw in some forgiveness and flexibility and the qualities of an investor become magnified.
First of all, everyone makes mistakes.It is being able to admit that a mistake was made and to adapt to that mistake to make it right that truly separate the great men from the rank amateurs.In basketball, a shooter shoots no matter how many times he misses the basket.Sometimes a shooter will shoot when he is not open.At that point the shooter says, "My bad," thumps himself on the chest, gets back on defense, and if the team is lucky, he learns from the mistake by making a pass or driving to the basket the next time he is covered and doesn't have a shot.
An investor should be the same way.It isn't about getting hung up on a certain shot; it is taking the shot that counts.If the investment doesn't work out, it is important to be able to let go mentally and to sell the stock to limit the mistake.If the person is emotionally attached to the stock for some reason, he or she may have to accept the loss that comes with that stock.Some stocks will make a legitimate comeback, but while the investor is waiting for it to return to the levels at which it was purchased, he or she is missing out on other opportunities that may provide a better return.(This is called the opportunity cost.)
Liking a company is a good reason to look into it to see if it is worth an investment, but it shouldn't be the only reason that an investor puts money into it.There are some good companies out there that make great sense to invest in, the problem is that not all companies that the investor likes are going to be good investment opportunities.It is up to the investor to make sure that it is more than the visceral feeling of enjoyment that is getting him or her to invest in the company or he or she can just be okay with losing the money invested in the company.That is okay, too, but it isn't the best case scenario.
Investing should be done with a great amount of logic and no emotion.Leave your Captain Kirk at home for the football game and fight night.Bring your Mr. Spock to the table when it comes to investing and you will do better with your money.


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