The Pain of Falling in Love [With a Stock]

This article was originally published for RC Peck’s Fearless Wealth Newsletter in July 2006.
Have you ever fallen in love… with a stock?
Stayed with it even when it was treating you badly?
It didn’t do what you asked of it?

Have you ever held onto false hope that your stock would make all your fantasies come true? Maybe the stock fell in price and you caught yourself saying, “But I know I’m right! This is a great company. I love this company!” When you get attached (read: fall in love) to stocks you just might be in for some pain (read: losing money).

Do not confuse what you think is right with what is actually happening in the markets. It might not make sense for the stock market to be moving up when we have a $44 trillion government debt, a US trade deficit at an all time high, a (long-term) weakening US dollar and a war in Iraq. But if the market is moving up, then it’s moving up. There is no negotiating with the market.

What may happen is, investors will continue to look for all the reasons why the market shouldn’t be going up (or down) and they will place their trades and investments based on what they think the market should do, and NOT what the market is actually doing. The same way a person makes decisions when in love.

The market can go against you longer than your account has money in it. It may not make sense to you but if you disrespect the direction of the market or your stock then you will pay dearly.

As investors it is not our job to predict or guess what the market should be doing. Our only job is to follow a method that will grow our money based on what the stock market is actually doing now.

Hint; you only make money in the stock market when the price of what you own increases… And not when the profits increase or when the earnings increase or when the company expands. You make or lose on one thing, price change.

If you want to grow your money, then you must learn how to invest in what is happening in the markets today, and remember that the market is never wrong. Here is a word of advice: if the stock you fell in love with is running in the wrong direction, then it’s time to break up.

Here’s to a vow of celibacy in the stock world.

Happy dating,
RC’s Signature