One of the essential lessons I get from the book is the emphasis (almost in all investing books I read) on the need to control the two emotions in trading - Greed and Fear. The book went on to quote some examples which I find very inspiring and worth sharing in this post.
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| CC Image courtesy of Daddy Hardhead on Flickr |
"Greed causes investors to put too much money into one investment, to overstay a winning investment or to use leverage to enhance the returns of a sure thing."
"Greed makes us believe that the investment of the moment is a buy at any price because the future is so certain and the price has been going up like crazy."
"Greed leads investors to do wild, reckless things that can often lead to permanent losses of capital, which are BRUTALLY difficult to recover from."
Be fearful when others are greedy, and be greedy when others are fearful - Warren Buffet
"Fear overlooks returns because of the current perceived risks in the market or economy."
"Fear makes us forget the moments of maximum uncertainty are often when the risk is lowest because so much bad news is priced into the investment."
"Fear makes us believe at any price because everything has been going down and the future is so uncertain."
So, the question is - are you in control of your greed and fear?
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