Are you investing for growth? Do you sometimes fall in a trap of your mind while making decisions? Here are a few secrets that can help you.
Today I am going to tell you a little secret: Ignore your monkey mind, which is the emotional and irrational side of your brain while investing for growth.
Because psychology and emotions are your portfolio’s worst enemies.
And this is absolutely true.
In this article, I will clarify how you can protect yourself from your own monkey mind.
Get. Set. Read!
Don’t Ignore your Entire Mind when Investing For Growth
I am asking you to ignore your monkey mind, not your entire mind.
I am asking you to leave behind your emotional decision-making while investing for growth.
But should you ignore even your monkey mind?
Well, here a few reasons out of the lot:
Whenever your monkey mind sees the stock market rising even a bit, it instructs you to purchase more stocks.
Whenever your monkey mind sees the stock market falling even a bit, it instructs you to sell your stocks.
The Monkey Mind is very emotional. It shoots first and aims later!
Monkey mind doesn’t think. It responds.
Don’t listen to your monkey mind.
Instead, try inculcating discipline and planning in your life. Discipline overpowers emotions.
So, what to do while investing for growth?
Basically, there are two types of people in the world: smart people and wise people.
Both of them become successful by learning through mistakes.
But, smart people learn from their own mistakes whereas wise people learn from others’ mistakes.
Therefore, what to do while investing is to become one of the ‘wise’ people.
Try learning from others’ mistakes. Save yourself some time.
But why to study ways of investing?
Well, there are innumerable ways of investing. And if you resort to hitting and trial method with each of them, it will take you an entire lifetime to discover the correct method.
Therefore, it is important to study the ‘correct’ way of investing. Not by copying others, but by learning from others.
However, there are a few things that we all can copy from successful investors.
Those are the habits not to do.
Clearly, these expert investors know what not to do and hence stand where they are today. They know how to adopt unique investing tricks in order to avoid losing money.
In fact, it is more important to learn not to lose money than to learn to earn money.
What Not to Do?
Do you know why people resort to financial advisors?
Because they can’t control their monkey mind. They seem to flow with emotions. They don’t have a disciplined approach to investing.
Remember, emotions are your portfolio’s worst enemy.
Only those people who don’t trust their own self-control hire financial advisors. But, hiring financial advisors is not always a good idea.
Therefore, you must get your monkey mind in control.
Here are 3 things you should not do:
1. Don’t internalize your ‘mistakes’
When you’ll lose money in the market (notice I wrote ‘when’ and not ‘if’ because this is eventually happen at least once), the last thing you can do to make it worse is to blame it on yourself.
Take a panoramic view of the situation. Could you have avoided it? For what reason did the market decline?
For instance, a stock market crash is likely to happen during an investor’s lifetime.
When it occurs, obviously the prices will fall.
You must be rationally prepared for it. Don’t let your emotions tell you otherwise.
You will have to stay resilient during these times. Or else, your monkey mind will tell you to sell the stocks and get out.
If I listen to my monkey mind during such situations, then I would successfully convert an ‘external’ problem into an ‘internal’ problem.
So, how do I resist selling the stocks?
Well, through discipline and planning.
By observing this standard: In the wake of purchasing stocks, clutch and hold onto them for a long period of time, say 30 years.
When you can’t trust your feelings, let your discipline and planning control your choices.
Once you have a proper investing strategy in place, you’ll become less vulnerable to internalizing your mistakes.
Moreover, you will keep your monkey mind under control.
2. Don’t get Confused between Different Types of Risks
There is a difference between investing, speculating and gambling.
Similarly, there is a difference between the types of risks they carry.
The major difference is that gambling creates risk whereas investing and speculating manage risk.
All investments for growth basically carry an equal amount of risk. It’s just a matter of how you handle it.
Let me clarify the difference further:
Investing – Buying a stock and then keeping it for a minimum period of 30 years irrespective of the ups and lows of the market.
Gambling – Buying a stock and then waiting for an increase in price just to sell it to earn some easy gains.
There is nothing wrong with both of them but what matters is what your investment goal is.
3. Avoid Emotionalism and Crowd
This includes avoiding emotionalism during an investor.
For example, say your plan is to invest 90% of your money into company X. But you read in the newspaper that an upcoming company called Y is coming up with its IPO.
So, instead of going forward with your plan, you opt to invest some amount in that new IPO.
Regardless of whether you did the correct thing or that does not make a difference. Whether you gained or not should be regardless.
What makes the difference is that you got diverted from your ‘plan’. You weren’t disciplined enough.
In other words, you let your emotions get the better of you.
You didn’t make the decision. Your monkey mind did.
I hope I was able to bring my point home.
If you make an investment plan, you have got to stick it. No matter what the market conditions, you have to stay disciplined.
This won’t be simple, but it surely ensures that you beat your monkey mind.
You must control your urge to divert from your plan since if you do that, you are following the ‘crowd’. And to stand apart, to do something big, crowd following is the last thing you must resort to.
That’s it for this post.
We learned how to not follow expert investors blindly, how to not let our emotions get the better of ourselves and how most of our investing mistakes are psychological.
I hope you will draft a plan and adapt it in a disciplined manner. And chuck any urges that come your way to divert from your plan.
Keep following Bachat for more such insightful pieces of financial advice.