4 Lessons From Buffett That Every Investor Needs To Know
Behind each trade or investment, they are there… lurking, waiting to reveal themselves during a moment of weakness.
They are the four fears of investing.
I learned about these early into my trading career, and I’ve been a victim of each one over time. All drama aside, they affect every investor or trader who actively manages his or her own money.
In no particular order, the four fears are as follows:
1. Fear Of Loss
2. Fear Of Missing Out
3. Fear Of Letting A Profit Turn Into A Loss
4. Fear Of Being Wrong
Despite their prevalence, there are fortunately many methods to help conquer each of these fears. One of these tools comes from the long career and immortalized wisdom of the Oracle of Omaha himself.
While I can’t be 100% sure what Warren Buffett would say in regard to each of these problems, we can use his bank of interview quotes and newsletter excerpts to infer what the billionaire would say about understanding and conquering each problem.
1. Fear Of Loss
I have seen the fear of loss paralyze and end more trading careers than I’d like to recall. When buying a stock, there’s an overwhelming chance you won’t pick the exact bottom, which means losing money before hopefully turning a profit. Taking risk and experiencing loss are part of the game.
This fear keeps many from executing a position in the first place. Alternatively, seeing your recent purchase fall can cause enough anxiety for an investor to exit their position and take quick losses. This is a quick way to nickel and dime your accounts.
Note that lacking this fear completely could be even more disastrous. Feeling immune to the fear of loss and ignoring stops can see an investment drop to $0 (or worse, if it’s a short position).
Buffett’s take: “Risk comes from not knowing what you’re doing.” “Time is the friend of the wonderful business, the enemy of the mediocre.”
Solution: Patience is key. Being patient before buying may make for a more comfortable entry and can give your trade enough room to grow — even if that means a missed opportunity. Always keep a realistic and appropriate stop-loss and commit to it. Keeping the quality of your trades high will limit this fear.
….read 2 thru 4 HERE
