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The #1 Reason You Lose Money Investing

It's Not Greed

Written by Luke Burgess
Posted April 20, 2016

Here's the #1 reason most investors don't make as much money as they should trading stocks...

They're afraid to hit the sell button.

And this affects investors on all levels.

Sometimes investors can feel resistance to selling when they see gains in their portfolios.

It's been called “greed” by some.

But (if I can put on my psychologist cap for a moment) I don't believe that greed is all of the motivation behind the resistance to sell with a profit. I actually believe that fear plays an important role, too.

Specifically, I mean that I believe investors experience a “fear of missing out.”

The Fear of Missing Out — or FOMO — is essentially a fear of future regret. Usually, FOMO is used to describe a person's angst that others are having some kind of fun or rewarding social experience that they aren't.

Your teenage kids have said this to you... and you probably said this as a teenager yourself...

“But mom/dad, everyone is going!”

Marketing communications firm J. Walter Thompson Worldwide says, “Fear Of Missing Out (FOMO) is the uneasy and sometimes all-consuming feeling that you’re missing out—that your peers are doing, in the know about or in possession of more or something better than you.”

But the idea can be applied to investing as well. Investors can feel a Fear of Missing Out on could-be profits. How do I know?

Because I deal with it myself sometimes.

And I'm 100% sure that I'm not alone.

But FOMO is a demon that investors need to battle — especially when considering short-term gains.

Here's a personal story to explain why I say that...

Back in February, my younger brother told me one of his biotech stocks was up $1,700 in his portfolio after only a week of owning it. Great! But he didn't want to sell it because he thought it was headed higher — until I explained it like this...

Holding onto a $1,700 weekly gain in paper is like not cashing a weekly check on an additional $88,000 annual income.

Plus, that money can be contributed to your next investment.

He sold it.

I'm not sure if that biotech stock did, in fact, go any higher. But I don't think it did — otherwise I probably would have never heard the end of it.

Still, I stand by my call...

Take the money.

Isn't that the whole point here anyway?

I've must have put it like this to investors a million times by now...

We don't want to marry stocks. We only want to date them for a while.

Nevertheless, I'm just like you: I'm not made of stone. I fall in love with them sometimes, too, and it's hard to break up. But trust me, they'll be happier in the end, and so will you.

Hit the sell button. Take the money.

Let's take a look at the returns of all of the gold and silver stocks I've mentioned to you here in Energy and Capital.

reason 2016 2

Sell.

I mean, that's all there is to it: sell.

Take the money. Let gold and silver prices cool off a little, and then we'll buy back in.

I think a good re-entry point will be next week on Tuesday the 26th prior to the Federal Reserve's FOMC meeting. I'm hoping to re-enter gold at about $1,240 an ounce and silver at around $16.25 an ounce then.

I'll get back to you on Monday with another trade.

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Luke Burgess
Energy and Capital

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