Not investing? Three excuses that keep you from making money investing

​The stock market is the only market where the goods go on sale and everyone becomes too afraid to buy. That may sound silly, but it’s exactly what happens when the market dips even a few percent, as it often does. Investors become scared and sell in a panic. Yet when prices rise, investors plunge in headlong. It’s a perfect recipe for “buying high and selling low.”

To avoid both of these extremes, investors have to understand the typical lies they tell themselves. Here are three of the biggest:
 
1. 'I’ll wait until the stock market is safe to invest.'
This excuse is used by investors after stocks have declined, when they’re too afraid to buy into the market. Maybe stocks have been declining a few days in a row or perhaps they’ve been on a long-term decline. But when investors say they're waiting for it to be safe, they mean they’re waiting for prices to climb. So waiting for (the perception of) safety is just a way to end up paying higher prices, and indeed it is often merely a perception of safety that investors are paying for.
 
What drives this behavior: Fear is the guiding emotion, but psychologists call this more specific behavior "loss aversion." That is, investors would rather avoid a short-term loss at any cost than achieve a longer-term gain. So when you feel pain at losing money, you’re likely to do anything to stop that hurt. So you sell stocks or don’t buy even when prices are cheap.
 
2. 'I’ll buy back in next week when it’s lower.'
This excuse is used by would-be buyers as they wait for the stock to drop. But investors never know which way stocks will move on any given day, especially in the short term. A stock or market could just as easily rise as fall next week. Smart investors buy stocks when they’re cheap and hold them over time.
 
What drives this behavior: It could be fear or greed. The fearful investor may worry the stock is going to fall before next week and waits, while the greedy investor expects a fall but wants to try to get a much better price than today’s.
 
3. 'I’m bored of this stock, so I’m selling.'
This excuse is used by investors who need excitement from their investments, like action in a casino. But smart investing is actually boring. The best investors sit on their stocks for years and years, letting them compound gains. Investing is not a quick-hit game, usually. All the gains come while you wait, not while you’re trading in and out of the market.
 
What drives this behavior: an investor’s desire for excitement. That desire may be fueled by the misguided notion that successful investors are trading every day to earn big gains. While some traders do successfully do this, even they are ruthlessly and rationally focused on the outcome. For them, it’s not about excitement but rather making money, so they avoid emotional decision-making.

​- Open a BO Account and start investing today!