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The quote comes from the must-read investing book Momentum Masters by Mark Minervini.
Why should you care about what this bloke says?
Well, to start, he won the US Investing Championship in 1997 with a 155% annual return. More impressive is that, over a 5 ½ year period, Mark’s portfolio returned an eye popping 220% annual return (he had only one losing quarter in that time). In dollar terms, that would take a $100,000 investment and ballooned it to over $30 million.
Okay, so ready to listen to what he has to say about investing?
Yeah. Thought so. Me too!
Here’s his quote from the book…
“I became consistently profitable when I finally said to myself, “The heck with ego; the goal is to make money, not be right.”
He went on to say this…
“Once I decided to put my ego aside, admit my mistakes, and cut my losses and protect profits, then big performance and the consistency started coming together.”
This point can’t be overemphasized enough. It is ego, psychology, emotions, etc. that knee caps the returns of investors more than anything else.
The market’s gonna do what the market’s gonna do.
You can’t take it personally. You can’t go around with a big ego thinking you’re gonna show the market who’s boss. Or trick it. Or make it your b!tch.
If you’re gonna actively trade, you have to do your research, develop a strategy (for buying AND selling stocks), refine it over time, don’t get a big head from your wins, learn from your losses and be prepared to put in a lot of hard work.
Then, you can get to a point where you consistently win more trades than you lose (and have learned how to cut your losses short so their damage to your overall returns are minimal).
But even if you do all that, if you don’t learn how to keep your ego and emotions in check, you won’t have a consistently successful trading career.
Your other option is just to stick to a buy and hold strategy (ideally in some ETFs) and basically match the market’s returns over the years. There’s no shame in that approach. In fact, do that and you’ll end up with way better returns than most investors in the stock market.
(But, even if you take that approach, you still have to get control of your emotions. Cuz if you panic and sell during a bear market when one hits, you’ll end up underperforming the markets over the long haul.)
Anyhoo, the takeaway is this…
… when it comes to investing of any kind, Emotion/Ego is the Enemy.