Written by John R. Nofsinger
An overview on Psychology of Investing
Did you know that psychology plays an important role where it determines a trader’s profit making skills? Trading is an art and requires not hardwork but proper planning and strategies. The investing psychology is also an important part of it.
An investor’s psychology that compels him to react in a certain way where his investments are concerned
An investor’s thought process, his ability to react for certain situations, etc influences his decision making skills subconsciously. This also includes the biases and beliefs an investor holds that would influence his trading strategies.
Controlling emotions is very essential as an investor. Emotions like fear, greed, pride, ego and denial will definitely affect the way one invests and also on decision making with regard to investing.
Diverting from being cliché
The investing psychology depicts that most often investors are of the belief that they need to find the right strategy followed making the right investment and systematically follow a plan to minimize their losses and amplify their returns.
Accepting losses and gains
Not wanting to lose money makes the investors to believe that their carefully designed strategies will never allow them to fail. And once they start losing money on their investment of experience losses they will only hope that it will recover someday earning them great profits.
Accepting losses is an important aspect of psychology of investing that prepares you to deal with losses and helps you device plans that will help you recover by investing in other assets and shares.