Keep Emotions Out Of Investments

If you come to this site, it’s most likely because you’re a beginner investing in the stock market or you’re already investing and want to learn more. What ever the reason that bought you here, the important thing is that you’re here.

I can sit here and tell you all about my positive and profitable experiences, but how much are you really going to learn by an experience where everything was done right?Those posts, and we have them here, have their place. They inspire and encourage but they don’t teach. That’s why on this site you will see both the positive and negative trades, but more of them will be the ones where I made mistakes and learned a huge lesson in the process.

I’ve said it before and believe me I’ll say it again and again, your emotions have no place in any of your trading decisions. If you think that people make it rich by playing hunches or a vibe that they had, I will tell you one of two things. Either they were very lucky or they are lying through their teeth. No matter what the reason, they took a very big risk.

In 2007 I was trading stocks in Sirius Satellite Radio and I was ahead several thousand dollars. Investors were coming into the stock and I was doing great. In the summer the announcement was made that they were going to merge with XM Satellite Radio to form one company and reduce expenses as well as increase revenue.

What I should have done there was to take my “marbles” and go home, but I figured this was the payday that I was waiting for. I’ve been a big fan of Howard Stern and subscribe to Sirius because of him. That’s where my emotions should have stayed.

Instead I took a position in the company after it dropped from where I sold out of all my shares. When the stock dropped some more because of the FCC delays on allowing the merger to go through, I bought more. At this point I was down 20% from cost basis.
After reading about all the hoopla that was circling the companies, I felt that this was all going to blow over and the stock would blast off. When the stock lost another 15% I had a feeling that this was just some sort of typical game that was being played during a long-dragged down fight between the FCC and the two companies.

At this point I lost all the profits that I made earlier in the year on the stock. I figured that I’ll make it all up once the deal was approved. I decided to buy as the stock fell. Not once, not twice, but three time. Right after that third time, I realized this was a trade that was controlling me, not the other way around.

I was about to start selling when the news was released that the Department of Justice approved the two companies to merge. The price jumped over 33% and I was back in the green again with the trade. At that point I didn’t think anything was going to stop this from going through and I was going to hit it big.

My emotions got in the way (again) as I watched the politicians play their game in trying to destroy the companies and dragged their feet as we waited for the FCC’s word on the merger.

By the time the approval came from the FCC, the two companies had lost millions of dollars each and was expecting to lose more over the next two quarters. I held on for whatever rallies came and started to trim my position in the stock. Unfortunately by the time I got out of the stock I was down over 35%.

If you’re new to the stock market, try your hand at the free fantasy stock market out there. It might give you the experience you need without losing any money. If I had listened to my brain instead of my feelings, I would have gotten out right after the DOJ’s approval came out. I wouldn’t have made that much money, but I also wouldn’t have lost as much as I did.It’s a lesson I learned the hard way. Keep your emotions out of the stock trade. It’s the only was you will survive.

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Tags: Beginner Investing, cost basis, investing in the stock market, money, stock drop, stock market, trading stocks

Filed Under Beginner Investing, Stock Research | 4 Comments

Tagged With Beginner Investing, cost basis, investing in the stock market, money, stock drop, stock market, trading stocks

Comments

4 Responses to “Keep Emotions Out Of Investments”

Adam on January 9th, 2009 1:57 pm

I’ve had a similar situation with Apple stock. Although they didn’t have problems like Sirius. I sold waaaayyy to early and missed out on thousands in profits!

Adams last blog post..Master’s Degree, Now Off to Work for Me!
joanne on January 9th, 2009 10:17 pm

Sorry to hear about your loses. Hopefully your learned some valuable lessons through it all. That makes it some-what worth the pain.
Your Money Relationship - Carnival of Money Stories #93 - BCS Edition on January 13th, 2009 8:05 am

[...] Billy at Beginner Investing shares his story about keeping emotions out of investing. [...]
Market Timing on June 1st, 2009 4:12 pm

the way I keep emotions out of investments is using my market timing system that is all algorithms that are non emotional.