If you had to define the term “stock” what would you say? Would you describe it as a slice of ownership in a company? Unfortunately, the majority of amateur investors would describe a stock just like that.
We are educated by the media and school system to believe that by buying a share of IBM stock, we are putting faith in IBM’s future performance. They tell us we are now part owners of IBM and if we own enough stock, we can play a role in decision making.
Now, that description of what a stock is isn’t false, it’s just a belief that will cause you to lose money. The problem is that when you believe that you own part of a company and whatnot, you begin to grow attached to the stock. Then, when the stock is down 30%, you just can’t bring yourself to sell out because you have gotten emotionally attached to the stock.
The solution: treat one stock just like every other stock. All you are doing is trading digital pieces of changing value and trying to make money off of. When you do this, you are one step closer to being an objective, profitable investor.
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