Investing may be interesting and stimulating, but it can also be tedious and tiring for the investor. Throughout the years, I have spoken to friends and peers who started out eager in investing but ended up jaded and disheartened. So what happened along the way? And why do these investors fall by the wayside and throw in the towel? I would like to explore three main reasons.
Too Difficult With Too Many Variables To Consider
This is by far the most common complaint among investors. Many of them feel that investing is too difficult to understand and that there are way too many things to think about and consider. This concern may stem from the fact that they are practising more of a top-down approach, rather than bottom-up, as I wrote about in a previous article. The process can be laborious and tedious if the investor is not familiar with the company or industry. There are, of course, many more factors to consider such as the economic and regulatory factors, among others.
With a full-time job and perhaps a family to take care of, many investors find that they are hard pressed for time to studiously run through earnings announcements and corporate press releases. Even if an investor can grasp many different concepts and disciplines, he may find that he is not able to devote the necessary time to run through his portfolio. Just as a garden grows best under the tender loving care of a gardener, a portfolio also needs frequent maintenance and “trimming” for it to do well. Investors who lack time would struggle to look after their portfolio properly, and it often falls into woeful neglect.
The Psychology And Emotions Involved
This is perhaps the most under-stated reason of all – many investors under-estimate the amount of emotion control and psychological tenacity needed to invest correctly and successfully.
The Foolish Bottom Line
As can be seen, one needs to have the patience and the necessary background knowledge to be able to invest, therefore what I recommend is to take time to learn and not to rush to invest in the stock market. As for psychology and emotions, an investor simply needs to be aware of their weaknesses and be wary of falling prey to biases and shortcuts. Once the investor has tackled these aspects, he would be more prepared to be a studious and careful investor.
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