Greed (just like fear) has a way of blinding you.
But don’t feel bad. Even the most astute investors fall victim to emotions like greed.
The other day a friend of mine was boasting about having a 20% gain on a stock he recently bought.
He said: “I really like this company but I didn’t expect to make this much in such a short time. In fact, I would’ve been happy to make this much in a years’ time.”
I said: “Did you sell it?”
He replied, “Nah, I’m holding on…at this pace I’ll probably make another 20%.”
This is a classic mistake.
What happens, too often, is you buy a stock and see an immediate increase in value. You then think it’s going to continue to go up and hold on to it too long. Eventually your profit disappears.
Then, you get mad when it continues to decline and refuse to sell it thinking it’s gonna “bounce back.”
You eventually get fed up and sell at a loss cursing your bad luck.
Later on, you see the stock going back up and you curse yourself again.
Rather than frustrate yourself, remember this: It’s never a profit (or a loss) until you take it.
If you forget this simple concept, I GUARANTEE YOU the market will eventually remind you of it.
A 20% return is a great profit, even if you have to pay taxes on it.
The problem most investors face is not having the right mindset when it comes to taking profits or losses.
You don’t have to be smart to win against Wall Street. You just need to see how simple it can be.
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