We must control our thoughts to create wealth

Last time we talked about the under-performance investors have compared to the market as measured by the S&P 500 index.

Obviously, the index is doing something that investors aren’t doing:  Staying put!!

Now, staying put sounds easy…until you try it.

The market will take a large downturn every 4-5 years.  During those times many people will be fearful and may try to get you to buy into that fear.  “I’ve had it with the market!  I am getting out and staying out for life!”  This is a common response to a downturn in stocks. 

Many of the people who panic out, got in only after they were emboldened by a long period of positive returns.  What is lacking is a deep conviction about why stocks go up or down in the first place. See  How do stocks work?

You can imagine the rest of the story.  These people have been doing this for a lifetime in some cases.  Their experience of wealth building has only been fearful with just enough moments of greed to keep them interested.  The “Fear and Greed Cycle” must be broken to succeed!

This person has no control over his own thoughts.  And to make matters worse, whenever he flips on CNBC for “help” he gets sold another lie.  That lie is the mother of all lies in investment advice.  It boils down to this: “You need to get out of the market before it goes down, then get back in before it goes up”. 

There are ten basic thinking errors we make in life.  These ten errors create almost all our misery.  Six of these errors have a huge impact on investing.  We will go through all six as we continue. 

The first and maybe most important error is “Fortune telling”.  This distortion gives us the magical ability to know the future.  Just like God!  We tell ourselves it is “wisdom” and prudent to listen to our own false predictions! 

I want to start with the error called “Fortune Telling” because it is something you need to know now so you can start making money with less stress. 

Next time we will investigate this thinking error, and how to avoid those thoughts.