The Top Two Lessons Every Investor Needs to Know
Here at Money & Crisis, it is my job to brief you on what’s happening in the markets, so that you can use that knowledge to make money.
That involves me covering everything from geopolitics to international trade to economics. I break it all down for you.
And with the markets down right now, I could go into detail about the big items rattling investors right now ― things like the coronavirus outbreak, the impeachment trial, or earnings season.
But as I’ve said before, knowing the reason stocks are down isn’t important. Instead, we need to focus on what to do in this situation. Which brings me to an important point…
How to Handle Changes in the Markets
Lesson #1: Control Your Emotions
The single biggest mistake I see investors make is becoming emotional and panicking, especially when the market is a sea of red.
During my nearly 20 years of guiding people through the markets, I’ve seen this countless times.
Getting emotional about a trade or a down day ALWAYS makes the situation worse. The ability to control one’s emotions and maintain one’s discipline is what separates traders who are EXTREMELY successful in the long term from traders who end up losing money time and again.
It’s absolutely essential to “manage the trade” by controlling our emotions.
Lesson #2: Sit Still!
One of the most difficult parts of successful investing is sitting still. (As someone who gets very excited about investing, I know firsthand how difficult this can be.)
However, in my experience, sitting still is perhaps the most important skill an investor needs to have.
After all, it is the urge to jump ― even when there isn’t a clear setup ― that leads to losses.
The reason is simple. In investing, you only have control over two things:
- When you open a trade.
- When you close a trade.
Everything else that happens in between those two items ― changes in the economy, the markets, etc. ― is completely outside your control.
I know. These lessons are hard to live by. It takes discipline to adhere to them.
But they’ll save you money in the long run…
Editor, Money & Crisis