How I Avoid Panic Selling My Stocks
Several years ago, when I was starting to think I was the next Warren Buffett, I loaded-up on Facebook shares.
“This is how it’s done,” I thought.
I understood the business, I had a second-level insight, and the price was reasonable. But I underestimated the impact of my own psychology.
Shortly thereafter Facebook was hit with an onslaught of negative headlines. The stock fell off a cliff. I panicked and sold my shares.
So much for being a young Warren Buffett.
How can I create content that helps individual investors avoid panic selling? Well, if there’s ever a day to put something together to solve that problem, today is the day.
Feeling panicked? Try this…
I compiled six of my favorite quotes about investing and emotions. Reading these quotes helps me avoid making costly mistakes when stocks are falling from the sky. I hope you that reading these quotes helps you, too.
A lot of people with high IQs are terrible investors because they've got terrible temperaments. And that is why we say that having a certain kind of temperament is more important than brains. You need to keep raw irrational emotion under control. You need patience and discipline and an ability to take losses and adversity without going crazy. You need an ability not to be driven crazy by extreme success. —Charlie Munger
The investor who permits himself to be stampeded or unduly worried by unjustified market declines in his holdings is perversely transforming his basic advantage into a basic disadvantage. —Benjamin Graham
When the price of a stock can be influenced by a herd on Wall Street with prices set at the margin by the most emotional person, or the greediest person, or the most depressed person, it is hard to argue that the market always prices rationally. In fact, market prices are frequently nonsensical. —Warren Buffett
Active portfolio managers know all too well what happens when investors open their monthly statement and see, in cold black and white, a drop in the dollar value of their holdings. Even those who understand intellectually that such dips are part of the normal course of events may react emotionally and fall into panic. —The Warren Buffett Portfolio by Robert Hagstrom
And just as herding induces investors to take greater and greater risks during periods of euphoria, so the same behavior often leads many investors simultaneously to throw in the towel when pessimism is rampant. The media tend to encourage such self-destructive behavior by hyping the severity of market declines and blowing the events out of proportion to gain viewers and listeners. Even without excessive media attention, large market movements encourage buy and sell decisions that are based on emotion rather than on logic. —A Random Walk Down Wall Street by Burton Gordon Malkiel
The power of psychological influences must never be underestimated. Greed, fear, suspension of disbelief, conformism, envy, ego and capitulation are all part of human nature, and their ability to compel action is profound, especially when they’re at extremes and shared by the herd. They’ll influence others, and the thoughtful investor will feel them as well. None of us should expect to be immune and insulated from them. Although we will feel them, we must not succumb; rather, we must recognize them for what they are and stand against them. Reason must overcome emotion. —The Most Important Thing by Howard Marks
Cash keeps me rational when the market tanks
Maintaining a meaningful cash position keeps my emotions from getting the best of me. Learn all the details in Episode #50 of the CMQ Investing podcast. It went live this morning.
👉 Listen to the episode on Apple Podcasts or Spotify
Should I make more posts like this? 🤔
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