Wednesday, 24 February 2016

RULE 74: Don’t Chase Bad Luck Runs


By on 05:00
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Actor Barrister Femi Adebayo with Actres Iyabo Ojo

We all have a tendency to buy on tips from other people, buy on a whim, buy glamorous, invest too much in anyone thing; ride a winner to death and, most fatally of all, fail to quit a loser. This is the one we really must learn to let go of.

There are four types of investors and it is clearly important to check which one you are - and which foibles you present. Thanks to Merrill Lynch (www.ml.com) for letting me reproduce this:
The Competitive Investor. Makes up around 17 per cent of all investors and that’s a 60/40 split male/female. Their biggest pluses are that they usually start investing early, have a lot of energy and are knowledge about their investments.
And the biggest minuses? They are greedy, over-confident and love chasing a losing streak.
The Measured Investor. This is the biggest group making up some 32 per cent of all investors with a 55/45 split male/female. They are secure in their investments, confident and think long term. Their one real big downside is they really find it hard to let go - they too chase a losing streak.

 “Nothing clouds your judgment more than throwing good money after bad luck runs. You have to learn to cut your losses and walk away and yes, I do know how hard that can be”.

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The Reluctant Investor. This makes up 26 per cent of all investors with a 47/53 split male/female. They are more likely to use an adviser, wait too long before investing and find it easier than any other group to let go. They also don’t like wasting time’ on their investments.
The Unprepared Investor: Represents 11 per cent of investors and a 47/53 split male/female. The description says it all really. They wait too long to start, put in too little money and don’t let go soon enough. They tend to concentrate on one investment too much and are easily swayed by ‘hot’ tips.
Hannah Grove, chief marketing officer of Merrill Lynch Investment Managers says: ‘Money is an emotional instrument, but emotions can get in the way of making the right investment decisions ... If we can fathom our individual emotional tendencies, then we can take steps to anticipate and correct them.’
It is imperative that you know what type of investor you are - and when to quit riding a losing streak. Nothing clouds your judgment more than throwing good money after bad luck runs. You have to learn to cut your losses and walk away and yes, I do know how hard that can be. 

From The Book; The Rules of Wealth by Richard Templar
(Read Rule 75 of Rule of Wealth tomorrow on Asabeafrika)

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