We all have Minnesota friends or relatives who are not good with numbers. You may even be willing to admit that you fall into that category as well.
Most people laugh off their lack of mathematical ability and go on with their life. But when a handicap with numbers affects your stock market investment returns, it is not so easy to forget.
Stock market investors are strongly anchored in their beliefs when they make a decision to buy an individual stock or mutual fund. How many times have you listened to a stock market investor who can list all the reasons that their stock market investment should go up in value?
Not every stock market investment is a big winner. When a stock market investor begins to lose money is when the management of emotions begins to get important.
Stock market investors maintain a strong sense of hope that they will eventually be proven correct, and that their current losing stock market position will eventually “make money.” They suffer from an irrational version of mental accounting.
Stock market investors never want to sell their losing investment positions. These investors have a very hard time admitting that they lost money in the stock market.
The current stock market levels are at multi-year highs. If you own a stock or a stock mutual fund now that is not close to its all-time high price level, you should take a hard look at the reason that you own it.
Think about changing your mental accounting once and for all going forward. Hanging on to losing stock market position may be the cause of your stock market investment underperformance.
Ric Lager
Lager & Company, Inc.
