Want to grow your money? Investing lessons you can learn from farming
People often make investments with false expectations. I know because I have done it often enough. When we choose an investment, be it a stock or mutual fund, it’s an act of belief, of commitment.
We choose the investment, so we are responsible for it. No one chooses an investment hoping that it will make modest gains or give returns on par with the markets. Inevitably, the expectations tend to be high, and the reality for many of our investments does not meet these expectations.
At this point, the natural reaction is to pass the blame on to the stocks, fund manager, or adviser. It’s human nature. However, the truth is that no matter which type of investment we make, it’s our money, and we are responsible.
If we make a bad decision, it’s better to recognise it as such, understand what happened, and move on. How do we know if the decision was really bad? Often, we don’t. Investors and, in fact, the entire market, tend to go through cycles of euphoria and depression.
Just as we are over-optimistic about investments in the beginning, we get over-pessimistic if they don’t meet our initial expectations. It’s easy to fall into the trap of turning pessimistic and selling our investments early. If your initial thesis of why it was a good investment still holds, keep holding it.
The problem is that most of us start with more hope than reasoning, but this is a problem that should be resolved at the start, not by selling too early. Choosing investments that are not suitable to our needs is another common trait. In fact, the process of choosing investments often does not begin with the right questions.
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