When people talk about investing, they are usually referring to the most common components. For example, saving for retirement or learning the basics of the stock market, but we have to remember that investing is a very big mental gamble. When we are learning how to trade, one of the biggest problems is not how to navigate the market, but it’s about our tendencies as human beings to take risks and accept rewards.
And this is why it’s important to remember that we are all emotional creatures, and our psychological and cognition is going to have an impact on our financial decision-making, and this can be for the worse. So what are the things that we need to consider?
The Guilt of Gambling
This is more common with new investors, because they may not have much money, and the reason they are starting to invest in the first place is that they want to secure a solid financial future. But the duality is not just to do with the guilt, but this could be clouded by a number of other components. For example, their religion, and while there are certain professional services that can help with the religious side effects such as Islamic Forex accounts specialists for people following the Islamic faith, when we feel guilty about investing, this is to do with the fact that we are investing money that we could potentially lose. If we lose it, it will put us off doing it again, and we will lose money as a result.
The Stress of “Playing the Long Game”
We hear about people like Warren Buffett talking about playing the long game in terms of investment, but if we are going to be successful in investing, we’ve got to take over the demons that can arise when we are playing the long game. One of the biggest problems investors have is that they hold onto the losing stocks for too long, but they sell the winning ones quickly. Naturally, as prices fluctuate, we have to factor the movement of a stock, and as people will pull out of a trade quickly, this is usually because they have adopted a risk-averse mentality, and this usually arises from ignoring the long game and looking for the immediate results. Of course, this is exactly what day traders do, but if you are looking for something that will reap rewards in the long-term, it’s about holding your nerve, and when it comes to finances, many people do not have the capacity to do it but it’s definitely worth learning how to do it.
Being Addicted to the Anticipation
If you’ve ever gambled on something, you might very well know this feeling and how addictive it is. The anticipation of checking the stocks first thing in the morning could be the thing that gets you out of bed, and when you start to get that taste for large sums of money passing in and out of your account, it’s very easy to become addicted to this, but this is where mistakes can arise. Instead, it is important to remember that with all of these components, we’ve got to be aware of our psychological roadblocks. And the answer is all about laying out what we want and why we want it.