The Motivation Behind Investing
February 27th 2007 14:10
If you are an investor, do you know why you invest? I guess that for most people the answer must be “to make a gain”. Yet, from my observations I realise that the motivation behind investing is, for most people, individual and mainly unconscious.
Many people invest to enhance their socio-economic status. These are the people who boast about the glamorous companies they buy and sell and the size of their portfolio.
When they lose money, they say the stock “didn’t perform”, and mention the size of their losses so that you understand that they have much.
Some other people invest for the thrill and action of investing. They are the traders of all kinds, the people who make at least 15 transactions a day and let you know that.
For these people, the more action they get the better and they often go into more thrilling markets such as futures and currency. They might make some money in bull markets, but, as I envisage, none in bear ones.
Some people are attracted to invest because they have a gambling mind and want to speculate. They typically buy when the price goes up and sell when it comes down. I know someone who lost $30,000 this way.
Obviously, they should be buying when the price is low and selling when it’s high. The possibility of making a great easy gain, though, is their motivation.
Some other people invest because they want to follow the herd. These are the ones very socially attuned and who follow every trend. If some research papers say momentum investing works, they say “forget fundamental analysis, momentum is way to go”.
It’s interesting that, if these people turned to fashion design instead, and left their money with an index fund, they would probably be better off and would not have to worry with investment methods.
Others invest because they want to make a point. A Chef once told me that if he stayed with blue-chips such as BHP-Billiton he would be safe and prosper. The most practical problem with investing with blue-chips, though, is that they are often too expensive. And, obviously, if you buy high, chances are it might fall low.
Anyway, probably everyone has their own very personal motivation to invest. Do you know, though, what is yours?
Many people invest to enhance their socio-economic status. These are the people who boast about the glamorous companies they buy and sell and the size of their portfolio.
When they lose money, they say the stock “didn’t perform”, and mention the size of their losses so that you understand that they have much.
Some other people invest for the thrill and action of investing. They are the traders of all kinds, the people who make at least 15 transactions a day and let you know that.
For these people, the more action they get the better and they often go into more thrilling markets such as futures and currency. They might make some money in bull markets, but, as I envisage, none in bear ones.
Some people are attracted to invest because they have a gambling mind and want to speculate. They typically buy when the price goes up and sell when it comes down. I know someone who lost $30,000 this way.
Obviously, they should be buying when the price is low and selling when it’s high. The possibility of making a great easy gain, though, is their motivation.
Some other people invest because they want to follow the herd. These are the ones very socially attuned and who follow every trend. If some research papers say momentum investing works, they say “forget fundamental analysis, momentum is way to go”.
It’s interesting that, if these people turned to fashion design instead, and left their money with an index fund, they would probably be better off and would not have to worry with investment methods.
Others invest because they want to make a point. A Chef once told me that if he stayed with blue-chips such as BHP-Billiton he would be safe and prosper. The most practical problem with investing with blue-chips, though, is that they are often too expensive. And, obviously, if you buy high, chances are it might fall low.
Anyway, probably everyone has their own very personal motivation to invest. Do you know, though, what is yours?
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