In recent months, the stock and property markets have taken some mighty big tumbles. As yan investor, your investment value probably isn't as big as it was a few months ago. What makes it even worse is thinking that I might lose even more.
Fear is one of the biggest enemies to successful investing. Greed is another enemy. When the market is dropping fast, both of these emotions will work against you and cause you to make terrible decisions with your money.
Fear will tell you that you're about to lose everything. And greed will tell you to take action to preserve what you have left. And the most likely action you'll take is to sell when the market is coming down. Bad decision!
Intelligent and experienced thinkers and investors tell us repeatedly not to worry, not to fear, and not to be greedy – it is just the “cycle” at work. Trouble is, we know what is right. It's just tough to do.
How many times have you been told to buy low and sell high? Well, the only way to do that is to overcome fear and greed. When the market is dropping, and your emotions are pushing you to sell, you have to resist. In fact, you have to look for opportunities to do just the opposite. These market drops are fantastic opportunities to buy in when prices are low. It's now a buyer’s market. Sellers want out and they're willing to sell at a deep discount.
This is true in every market, including real estate. I'm a big fan of real estate. I think it's a fantastic long-term investment. But real estate right now doesn't seem like a good investment because of the sub-prime mortgage mess. On the contrary, now is a great time to buy. Buyers can get a great deal if they're willing to look around and overcome the fear they feel.
In order to do this, you have to be willing to do just the opposite when the markets are up. Emotions will tell you it's time to buy more when you've just made a lot of money. But at that point, your risk goes up and you need to sell some of your investment to protect yourself.
For instance, when the Dow hit 14,000 last year, it was time to sell at least some of your position. And those of you who bought gold as an investment (not as an insurance policy), should consider selling some of your ounces. I'm not saying the investment won't go higher, but you've got to raise money when your investments go up. And the only way to do that is to sell a portion. That way you'll have some cash to buy other investments that are selling for much better prices.
Emotion can ruin a relationship. But if you manage emotions properly, your relationships and your investments will be in much better shape. Here are four quick tips to help you make wise decisions with your investments:
1) When you feel like everything is lost and all you want to do is sell – that's when you need to begin buying.
2) When you feel like everything is going your way, you don't think you can lose (notice the pride in this thought), and you're ready to buy – it's time to begin selling.
3) Take small steps. Don't sell everything at one time. And don't buy everything at one time. Small steps will help you avoid big mistakes.
4) Don't look for the exact top or the exact bottom. It's almost impossible to sell at the very top. Selling in small increments will help equalize your sell price at a good average. And don't look for the bottom to begin buying. It's just as tough to find as the top. Buying in small increments will give you a good average price to build your portfolio on. Trying to time the exact top and the exact bottom is a subtle form of greed – one of the emotions that will work against you.
Following these simple steps will help you maximize your profits regardless of the market's direction.
Copyright 2008 Danny Silver
Danny Silver is the co-founder and managing partner of CoursesInc a wealth education online courses firm and InfoTelly a wealth education TV portal. He is an international Real Estate expert and has been marketing new-build property for over 33 years - with the same group! Danny is also property marketing consultant for some of the world's leading banking institutions and developers in over 20 countries worldwide. He is also the most sought after speaker and teacher in the USA on buying and holding Real Estate internationally. To find out how he can help you visit his site at http://www.propertydirectamerica.com