Investing in your ego is perilous to your bottom line.

So, why is it that when we come across a investment idea that we wait until a confirmation to act? We act after a major move, get it when everyone else already has and act like sheep. Have you ever said to yourself – “I knew that was going to happen”. Sure we all have had moments of genius, and done nothing about them.

When an idea or potential action is at its infancy we hesitate for a variety of reasons. For me personally it is the fear that I might be wrong. Well, there are things to safeguard against such fears such as stop-loss orders, options, hedges, etc… Staying paralyzed does us no good as the opportunity will pass as quickly as it came.

Jumping onto the boat or making a trade late in the game might sound like a good idea. However, one must carefully evaluate if that is true. After a major move is your initial idea still valid? Has the environment changed? What is your time horizon?

Instead our ego jumps into the picture and says don’t be left behind, or I was right then so I’m still right. Then once you are in and want to be right about the direction you choose you hope and prey, but alas it is going against you. First a couple points, and then a few more. You are almost to your stop-loss (assuming you placed one) and decide to move it down a bit more. You know you need to keep it in place, but your ego jumps in again and says you were right so hold on.

Well, the more I read and also the more I understand myself the above isn’t fantasy, but a harsh reality. We all like to be right and love to feed our ego’s. If your ego is still running full-ahead (remember Titanic) – if you are saying “what ego?” or “I don’t know what you are talking about” then I recommend reading the following:

I read it and it is a start to get my ego in check, and emotions out of the markets. If you are able to see that your ego is acting on your behalf you are one step closer to knowing your strengths and weaknesses.