Sunday, August 31, 2008

Psychology of successful investing


Psychology of successful investing


So many books on how to invest in the stock market have been published. Many have focused on the technical, fundamental, or other strategies for sophisticated and amateur investors. However, not many have stressed on the psychological effect of one's investments.

Banjong Amorncheevin believes psychology is no less important than other factors influencing an investor's mind and the decision-making process.

All stock markets worldwide have been painted with emotions, mood and feelings, be it tears, laughs, gladness, disappointment and so on. All have been caused by these two words: Greed and fear.

Fear of losing money during the times of market downturns or chances to earn more when the market is skyrocketing. Greed of wanting to earn as much profits as others or even more than others.

Thus, to win the battle, the writer believes the essence is to truly understand ones' psychological stage and personality that actually influences one's decision-making process.

In the first few chapters, the writer discusses the different types of personality disorders such as paranoid, schizoid, schizotypal, histrionic, narcissistic, antisocial, borderline, avoidant, obsessive compulsive and depressive. They all impact and disrupt the decision-making process.

Other things like the person's ego, learning process and childhood experiences also affect the investor's choice.

The latter half of the book outlines ways to balance the aforementioned emotions and the disorders and get the best results out of it. One thing he cautions is stress. Basically stress does have big influence on investors' decisions. So it's necessary for investors to find ways to cope with it.

Patience is another key word here. The writer believes it's the core necessity for all investors. Good investments do take times. However, investors are often and easily lured into quick money or overnight richness. The media can also misguide investors, he says.

In the last few chapters, the writer outlines guidelines on how to change ones' behaviour patterns to fix the mistakes in investing.

The book is a good read for both beginners and even sophisticated investors.

However, it contains too many psychological jargon that may somehow, confuse readers.

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