Think Like the Great Investors: Make Better Decisions and Raise Your Investing to a New Level

Chapter 36

Conquer fear

As beginners, we all come to the stock market with completely the wrong idea. We come looking for a way to buy and sell stocks and make a profit every time. Deep inside us we think there are people who make money on every investment.

The realisation that this was not so was one of the most unsettling things I discovered when I started investing. Like everyone else, I thought it was due to my lack of knowledge and skill. Eventually I came to understand that losses are part of the nature of investing, because it involves taking on and managing uncertainty. This means that many of the investments anyone makes will lose money. Then I came to the deeper realisation that is one of the secrets of successful investing.

This realisation is that what really stops us from investing successfully is fear. There are three primary ways in which fear stops us succeeding as investors:

• We are frightened to pull the trigger, as the professionals call it — to make the investment in the first place. Yet most of us will look back over the opportunities we did not take advantage of and bemoan the fact that so many of them would have been very profitable investments. In other words, we could see the opportunities alright, but we were fearful of taking them.

• We are frightened to take our bad medicine. We make an investment and it starts to go wrong. We know we should sell ...