Originally published January 21, 2008.
Investors have a bad habit of treating the stock market like a Monopoly® game. These same investors then forget that they are playing with real money instead of play money until it’s too late. You’ll do yourself, and your investments, a favor if you go to the movies instead.
When you try to make investing entertaining, you start making decisions that aren’t based on what’s best for the long term but rather on what perks up your day. And because you’re human, it’s easy to get caught up in the roller coaster of emotions. First, there’s the rush of making the deal, followed by the edge of your seat anticipation, waiting to see what happens. You’ve only got two options: 1) the excitement of winning or 2) the depression of losing.
What’s next? Starting the cycle all over again with only one difference: it’s harder to duplicate the same excitement, so you push harder, making the risk of losses greater every time you go around the board. Again, we aren’t dealing with play money. This is the real thing, and you’ve worked too long and too hard to throw it away. Trust me. Go to the movies.
For more information about how this behavior, and other’s like it, affect your investor return, check out the Behavior Gap Snapshot.
