One reader emailed me an interesting comment a week ago on a topic that I have touched on from time to time. Here’s what he had to say:
Thanks again for all the valuable info. I realize that I need a service such as yours as I continue to make too many mistakes but it is difficult getting past my ego in what I think should happen in the market.
Not only does my education in economics/finance suggests that this market rise has been built upon the sand, its collapse is imminent. Of course I have been thinking that for almost year not unlike some of the famous economists and most of them of course are lousy investors. When my beliefs and training are not congruent with the trend line I seem to get paralyzed with indecision.
We all have views and opinions, and we like to be right about them. It strokes our ego and makes us feel good—it’s simply human nature.
However, when it comes to investing, I have found it’s wise to check your ego at the door and realize, as well as accept the fact, that you will be wrong from time to time, and that the market will behave in a way inconsistent with your thinking.
If you don’t, you will find yourself in the unenviable position of constantly fighting reality as far as market behavior is concerned. The market does what it does without your views and opinions anyway and it is best to accept that reality.
Personally, I try to clearly separate my view of the market from my investment decisions. While I have voiced an opinion in my writings somewhat similar to the reader’s above, my approach, as to whether to be involved in the market or not, is based on different criteria.
I have learned that there is no one person, entity or computer system able to crunch all of today’s news and come to a conclusion as to what the major indexes will do tomorrow or next week.
That’s why I think it’s an exercise in futility to waste any energy on trying to outguess the market. It’s easier to follow the trends and hop on board when they are in your favor and get off when your sell stops (or trend lines) indicate you do so.
Sometimes, not always, education can get in the way of keeping things simple. I have had conversations with readers well educated in the investment field, who were lousy investors simply because “they knew they were right.”
Humility is not a trait found on Wall Street, but it behooves you to shift your thinking and acknowledge once and for all that the market is far bigger than you are. Humbly accept your profits when you make them, be glad that you were able to sidestep a bear market when you did and accept the occasional whip-saw when it occurs.