How you manage stress in your investing is much more likely to make the difference between success and failure than your investing plan, your knowledge, or your sources of information.
Why? Because without the necessary skills for managing your mind-body systems when faced with uncertainty and potential for loss, people are very likely to do the wrong thing at exactly the wrong times.
It has been said that the markets are incredibly effective at making the largest number of investors and traders wrong the greatest number of times and within that truism is a real nugget.
Think about it, if most people in the markets are wrong most of the time, where do you want to be? Well, that's up to you since there are lots of good places to be in almost any market (including in cash), but it does make it clear where you don't want to be.
Or does it? What I am getting at is that there is "where you want to be" and "where you want to be" in this situation.
Where you want to be to make money is often exactly where your gut does not want to be.
Where you want to be is not with the herd, not with the conventional wisdom, not where it is certain, not where it is safe, not where we "know" things will be going, but those are exactly the kinds of situations that make us nervous.
When faced with situations that are uncertain and dangerous, most of us just want out of it.
We want that nervousness, fear, and uncertainty to end, even if the end is likely to be unpleasant.
It is exactly this phenomenon that has been attributed to Navy pilots driving an aircraft right into the end of an aircraft carrier even though it was clear that they were not on the right path for a safe landing.
Apparently they have to learn to overcome an innate urge to get that airplane onto the deck of the ship...
no matter what, and do what they have been trained to do, what they know will work...
even with their whole mind-body system screaming at them to "just get me out of here!" That's what successful traders and investors know how to do that most others don't.
They have a good plan, they stick to the plan, and when they find themselves not wanting to do that, they have the skills to get themselves under control and do it anyway.
They have learned to not let ego drive their actions.
Some seem to just come by this naturally and others have to learn it.
If you are one who needs to learn it or improve it, know that an effective stress management routine is necessarily simple.
You have to be able to do it when the "heat is on.
" That's the good news.
On the other hand this is not to say that it is easy.
Contrarian investing is easier to believe in than to do.
It takes an exceptional degree of self-awareness and commitment to craft a personal investing stress management profit plan and even more self-discipline to practice enough to make it automatic, but you didn't really want it do be easy, did you? If everyone could and would do it, what edge could it offer then.
Don't worry, most people aren't willing to do the work.
Want to succeed? See to it that you are one who will.