By Paul Goodwin, Cabot analyst and Editor of
Cabot China & Emerging Markets Report
From Cabot Wealth Advisory 1/19/08
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If you're an investor, you're worried. That's what you get paid for. George Gerschwin's classic song I Got Plenty of Nothin' reminds us that "Folks with plenty of plenty, all got a lock on the door," and it's true. If you have money at risk in the stock market (and never forget that money in the stock market is always at risk), you're worried about losses, or losing your profits, or missing the next big thing. People who don't care about winning don't play (and bank savings accounts are full of them). If you're in the market, you care, no matter how much you try to keep your risk down.
The real trick is to keep yourself from getting too giddy when stocks have handed you a nice profit or too depressed when the market throws your favorite stocks into the toilet.
It's a lot like the relationship some people have with their bathroom scale. If they get up and the scale tells them they're down a few pounds, then the sun is shining and all's right with the world. But if their weight is up a couple of pounds, they can hardly face themselves in the mirror. It's tough to put a simple machine in charge of your self esteem.
But it's equally tough to let the stock market tell you how to feel, and living through a full-grown bear market like the one we're having now will put even the most seasoned investor to the test.
There is no secret to maintaining your emotional equilibrium when the bear has ripped your favorite stock(s) to shreds. You just have to be sure that you get as much capital as you can out of harm's way and safely into your piggy bank (i.e. brokerage or money market account) so that you can start investing again when the investing climate changes.
The reason our system is called capitalism is that you have to have capital to be a player. So don't let an emotional reaction to a tanking stock keep you from selling and protecting the capital you have left. Know your sell disciplines, follow them and keep doing your homework by building your watch list of interesting stocks for the next bull run.
More Stock Investing advice:
Two Lessons from Stock Performance Champs 2/11/10
Paul Goodwin finds there's no substitute for buying well and a supportive market.
Cabot's Position on Shorting Stocks 1/27/10
Cabot Market Letter Editor Michael Cintolo explains Cabot's position on shorting stocks.
Why the Lost Decade is Good News for the Future 12/16/09
So-called “lost decades” for investors in the past have usually ushered in powerful new bull periods.
Ten Tips for Your Investing Toolkit 12/10/09
These tips will set you on the path of investing success.
Three Short Lessons for Investors Just Getting Started 12/4/09
These three short lessons will help you get started on the right track.
Three Characteristics of Winning Investors 11/26/09
Here are three particularly important traits of successful investors.
The Three Most Important Investing Lessons 11/6/09
Timothy Lutts focuses on the three most important lessons for successful investing.
Dispelling Investment Myths 10/15/09
Mike Cintolo busts five common investment myths.
A Simple Way to Assess Your Risk 10/1/09
A "position sheet" will give you a great view of your portfolio's risk and rewards.
Three Reasons to Own Individual Stocks 6/22/09
Paul Goodwin offers three reasons to invest in individual stocks over mutual funds.
Guidelines on Handling Earnings Gaps 4/22/09
Here are four guidelines to help you profit from earnings gaps.
How to Handle Earnings Season 4/19/09
Michael Cintolo offers three options for handling earnings season.
Three Clues to Determine the Market's Next Move 1/22/09
Here are a few clues to watch, so you can be one of the early ones on board the next move...whether it's up or down.
Advantages to Being an Individual Investor 1/12/09
Three ways individual investors have advantages over mutual funds.
Dispelling Six Common Investing Myths 7/3/08
Avoid some of what doesn't work in the stock market and improve your returns.
Listen to Your Stocks 4/23/08
A big earnings gap lower, especially after a stock has enjoyed a huge advance, often spells the end for a stock's up cycle.
Practice Patience Early in a New Bull Market 3/29/08
Considering the risk that you might buy at a false bottom, we don't think the risk is worth the reward.
Tips on Handling Market Stress 3/15/08
Having a system will help you manage market stress especially when the market's most volatile.
How to Invest During a Recession 1/17/08
Timothy Lutts is watching charts and finding bargains.
On Improving Your Personal Side of the Investing Equation 2/25/08
Eight ideas to help you improve your personal moneymaking habits from "New Market Wizard" by Jack Schwager.
SNaC to Keep Your Portfolio in Shape 2/11/08
SNaC stands for Story, Numbers and Chart, and it's the method Paul Goodwin uses to pick stocks for the Cabot China & Emerging Markets Report.
Be Ready to Buy when Market Leading Stocks are on Sale 2/1/08
The worse the economic chaos gets…and the lower the market goes…the better you like it.
What to do when Sellers are in Control of the Market
When the sellers remain in control, this Q&A will help you decide what to do.
Why Recession Really Doesn't Matter to Investors
Should you wait until the recession ends before you invest? No—because all stocks trade on expectations of the future.
Technical Analysis: Free Yourself from Why
The best investors generally free themselves from the question of why a stock or the market is going up or down.
Growth or Value Investor? Depends on your Investing Temperament
Which strategies are best for you? It’s all a matter of temperament.
Are you a Growth Investor or Value Investor?
The most important thing for you to understand about investing in stocks is yourself.
Know Thyself. Match your Investing System to your Personality
What really matters is matching the system's pros and cons with your own personality.
Stock Prices: Important and Nothing
It's value and opportunity, not the price of the stock. And then there's December...
Follow Your System
Your first task is to clearly identify your system; your second, and most difficult, is to follow that system.
Fundamental or Technical Analysis: The Perils of Purity
Following either of these investing styles exclusively can be risky for your total portfolio.
Wise Words from Warren’s Wife: Don’t get too attached to the outcome
People have been trying to follow Warren Buffett’s investing advice for years but maybe his wife’s advice can also be helpful.
A Stock, Like Love, Thrives on Romance and Dies on Statistics
If the RP line falters over a period of weeks, you’ll know the romance has ended.
Markets Are Never Wrong; Opinions Are
A rewarding strategy is to identify the current trend and stay with it as long as it persists.
Run, Sheep, Run
By watching investor sentiment and adjusting your investments accordingly, your investment results are sure to improve.