Fear is a Bad Adviser

One of the most important things that an investor should know, if he plans to make a lot of money by trading shares, is not only how the market moves – but what is causing it to move. What was it that Dale Carnegie said in one of his books: “A problem well stated, is a problem half solved?”

Don’t even ask why I am quoting Carnegie here. I know he was into those self help books. He became more popular because of his work on how to win friends, but in a place where we can win or lose millions or billions of money (depending on how the chips will fall) we better have all the help that we can get.

With all the references to forward, backward, upward or downward movements that are usually attributed to it, in reality, the market is actually inert. Leave it alone forever and it just sits there forever. It has to be inspired or driven for it to go a certain way. And it will serve best the investor to know what is driving it at any given moment, or where it is getting its inspiration to move that particular way.

The experts call them the Market Drivers.

Well, you know me. I am the guy who always wants you to learn more. So, if you want to dig further about those Market Drivers, hit the books or take a trip to the library. You can surf the web too, if you think that will suit you best, just don’t leave that knowledge too far down the surface when you get back to do the trade.

You can take your pick, but to me, Fear is the trickiest of all the drivers, Fear is a bad adviser. This thing exposes you to a lot of machinations. It makes you rather gullible or downright dumb, stupid, brainless, obtuse, dim-witted… Darn! There’s a long list of those adjectives out there. You don’t want to be any of them. Rather than do that, why not just send your money to the downtrodden and the oppressed? That way, you wouldn’t feel bad that you’d been tricked.

Getting tricked however, is not even half of that bitter pill that you’ll have to swallow if you lost a lot of money. The most acerbic taste would come from the fact that it was you, not the tricksters that made it happen! Pretty soon, you’ll know that you could have prevented them from taking your money. Worse, you could have just sat there and did nothing and you would have kept your money.
In the stock market lingo Fear is the opposite of Greed. Greed can deceive you too by making you believe that the price of even the worst of all those shares can be more expensive than the priciest gems. Well, without any basis, only greed can make you believe it.

As already mentioned in my earlier posts, greed can drive the market up. But not because the prices are going up, you are already assured of earnings. Not if you get in near the top or right at the peak of the prices.

Remember that there are people in that market that makes money wherever the market goes. It follows therefore, that there are people in that market that are losing money whichever way the market goes.

In a robust environment where all the prices are going up, a snippet of news that says China’s market sneezes (as it was catching cold) can send a shockwave around the world that causes your shares to burn.

Greed can lose you money, but fear might lose you more. That’s why Fear is a bad adviser.

Cheers!

 

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