Understanding investment psychology is crucial if you want to make the most out of your investing journey. Out of the many contributing factors to being a successful investor, this, to me, ranks as number one. While everyone should look out for their futures and create wealth, not everyone should do so by being in the public markets. Those who cannot handle their emotions and fall prey to the many biases that we as human beings unfortunately carry will get humbled.
Individuals who cannot master their emotions are ill-suited to profit from the investment process.
Ben Graham
We are our own worst enemy when it comes to investing. We talk so much about the risk of the markets, looking out for systematic and unsystematic risk. What about the risk we pose to ourselves? The market makes examples of all who think they are cunning and don’t respect the behavioural pitfalls we all face. We are all prone to the many biases that lie dormant within us. We all have the elements of greed and fear, self-interest, and the mindset that “it won’t happen to us.”
It never truly goes away; we can only become more aware of how our behaviour impacts our investing decisions and put in the checks and balances to help minimize poor decisions. Awareness of the areas and how they contribute to the failure of many investors can help us to always be on the prowl. Be vigilant always.
This part of the blog will elaborate on the behaviours around investing to help you know what to look for. The greatest bias of all is thinking we don’t have any biases. Improving our behaviour as stoic investors is about logical thinking, being rational, and being quite stoic in our approach. Hence the name!
