6. Don’t Get Emotional
The ups and downs of the stock market could often take your heart on a roller coaster ride! This is why it is commonly said that stock market investments are not for the faint-hearted. Further, if you have the fear of missing out (FOMO), it means that you are letting your emotions take over the driving seat in your brain and push you towards irrational decisions.
Here’s why emotion is your worst enemy and why you shouldn’t let your emotions take over you. Think about a stock that you are interested to invest. However, you think that the price is a tad too high at the moment. You decide to bid your time. Over the next few days, the stock continues to trade around the same price, which is still a bit high for your liking.
Fear of Missing
Then, here comes the moment. The share price suddenly shoots up 5 percent due to positive news that it is making a new investment in a revolutionary technology. What do you do now? Do you wait, or not? Most investors who are new to the world of investing will get FOMO. «What if I miss this chance and miss the boat entirely?» is the most common reason.
Better to pay a higher price than to pay the price for missing the boat right? In this case, Bogle suggested that the siren song of the market is there to seduce you into buying after the share price has soared. If you can’t control your emotions, it is only a matter of time that it will kill your investment capital.
Two Reasons
Over the years, many of Bogle’s disciples have, after 10 to 20 years, had returns in the top 20 percent of all investors. It is speculated that this could be for two reasons, partly because index funds are unlikely to fall behind, and partly because other investors tend to trade in counterproductive ways.
This article first appeared on BankBazaar.sg. BankBazaar.sg is a leading online marketplace in Singapore that helps consumers compare and apply for financial products such as credit cards and loans.
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