Quality investing works in the long term.

But what about the psychological aspect of investing?

How do you keep your head cool and make sound investment decisions?

Let’s dive in right away.

Humans = Emotional

We as humans are way less rational than we would dare to admit to ourselves.

That’s exactly where the term herd behavior comes from.

It’s very hard to go against the crowd.

As an investor, you should be aware of the many biases you suffer from:

• Recency bias: Assuming recent trends will continue in the future

• Loss aversion: A loss of $100 feels twice as painful as the satisfaction of a $100 gain

• Confirmation bias: Only looking at information that supports your current opinion

• Overconfidence bias: Believing you are better at picking stocks or timing the market than you really are

• Sunk cost fallacy: Continuing to hold or invest in a losing position because of prior time or money spent

• Mental accounting: Treating money differently based on where it came from or how it’s labeled, rather than overall value.

The list goes on and on.

We even dedicated a full article to it called ‘9 Investing truths to remember’.

But we didn’t talk about the biggest risk for you as an investor yet…

… Fear and greed.

Both fear and greed makes you take irrational investment decisions.

That’s also why the best investors in the world are usually seen as ‘cold’.
They seem to be able to turn off their emotions.

Everyone knows this statement from Warren Buffett:

But it also means the following…

As an investor you tend to become overconfident when your stocks are doing well.

And you tend to doubt yourself when things aren’t going your way.

You should mentally wire yourself to do exactly the opposite.

So how do you not lose your mind when times are hard?

Or even better: swing heavily so you set the foundation for phenomenal returns in the future?

Ownership Thinking

You know it already, but it’s still worth repeating:

If you invest in a company, you are the (co-)owner of the business.

This also means that if you buy a single stock of a company, you should be willing to buy the entire business.

You buy 10 shares of Apple?

This means you think the company is worth more than $3.7 trillion.
You would like to buy the entire company for this amount if you had the money*.

If you have $3.7 trillion available, please send me an email :)

Let’s give another example.

Imagine you are the owner of the local grocery store around the corner.