Greed. It is the motivating emotion for anyone who invests or trades. Greed, despite what some would say, is neither good or bad. Greed is nothing more than the desire for more than needed. That is why I invest, to achieve excess wealth such that I have more than I will need at some future date.
But while I invest and trade because of Greed, I do not let Greed animate my investing and trading decisions. Rather, I rely on an entirely different emotion to guide my way in the market. The emotion on which I rely is Fear.
I rely on Fear because I find that it provides the voice of reason in contrast to Greed’s “siren song” which often sounds pleasing, but masks hidden dangers. My Fear serves to place a rationale check on Greed’s unbridled enthusiasm telling me to buy, buy, buy or sell, sell, sell. No matter a trader or investor, fear should have the same value to you.
Whether you follow a fundamental process and find an asset that sells for sixty cents on the dollar; or you are a technician whose analysis indicates that a stocks behavior is demonstrating a positive risk to reward scenario, Greed without Fear exposes you to unknown factors. Greed tells you all the reasons why you should make the trade, Fear asks you to consider why you should not.
Yet most would rather be Greedy than Fearful. Perhaps because nothing that serves to check your passion is ever popular. Yet Fear, properly embraced, can serve you much better than Greed. Fear, unlike Greed, forces you to stop and ask yourself not what is it that my Greed will earn me, but what is it that my Greed will cause me to lose. That is Fear’s value to any new investor or trader.
Fear may not be as sexy as Greed, but it will make you a lot more money.