The Most Important Thing Is … Combating Negative Influences
The Most Important Thing Is … Combating Negative Influences
This chapter looks at an important requirement for successful investing: combating negative influences. It describes the emotional pressure most investors feel when confronted with the power of a bull market. It argues that exploiting inefficiencies such as mispricings, misperceptions, or mistakes that other people make provide potential opportunities for superior performance is the only road to consistent outperformance. Many people possess the intellect needed to analyze data, but only a few are able to look more deeply into things and withstand the powerful influence of psychology. The biggest investing errors come from factors that are psychological rather than informational or analytical. This chapter considers a number of psychological factors that lead to incorrect investment decisions, including greed, fear, envy, and ego. It also offers suggestions on how investors can avoid psychological urges that drive them to do foolish things. Comments and insights from four famous investors and investment educators are presented.
Keywords: investors, psychology, investment, greed, fear, envy, ego, emotion
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