Get Rid of Childish Mentality Before Investing

When comes the matter of money, human emotions influence our decision-making process. We all cross various stages of life; childhood, adulthood, and old age. When we enter our early adulthood age, we start taking financial decisions. People start taking interest in stocks and other methods of investment. As time passes, they become a mature person but many of them never thought that still a child influencing their decisions. 

I have seen in my career that many people stock buying decisions influenced by their childish mentality. Due to this mentality many times they suffer losses. They want to become rich quickly but after few incidents, they left the market forever. 

I have observed the following emotional immaturity while buying stocks by various investors: 

1. Large Quantity: Children want to keep a large number of toffies and chocolates in their pockets. They are not satisfied by taking only one or two pieces. Even they are unable to eat but they want to keep it in their pocket and feel very happy by just keeping it in their pockets. 

Many investors have the same mentality when they consider buying stocks. They are always interested in ultra-cheap penny stocks or those stocks which they can accumulate in bulk quantity without understanding the fundamentals of the company. At first, they see the price and calculate it mentally that how much quantity they can buy, and if the quantity comes few then they simply ignore all fundamentals, all stock advice, they are not ready to give even one percent heed of the stock. What matters most for them is quantity. The same childish mentality who wants to keep more toffies and chocolates in their pocket. 

I have observed that many investors’ portfolio carries only those stocks which they can accumulate in big quantity. Although all the fundamentals have gone of those stocks, still they keep holding and holding it for years. 

Holding a big quantity of stocks in their portfolio satisfying the childish mentality that they have a large number of toffies and chocolates in their pockets although there is no meaning of that. 

When we are driving on a road and we know that now we are traveling on the wrong path, what action we will take – immediately U-turn. In the world of investment when you come to know that your decision in a particular stock has gone wrong, you should also take a U-turn, so that the direction of your portfolio will be right i.e., it will grow at a healthy pace. 

   2. Emotional Vicissitudes: Children often cry and please very easily.          Adults seldom do. 

The same behaviour I have observed among many investors. When prices fall below their buying price, they immediately feel panic and start collecting information from their sources looking for confirmation that their money is safe. When prices jump few rupees immediately, they cheer and rush to make a profit quickly. 

3. Impulsive behaviour: Children are impulsive, they speak recklessly, don’t want to wait for anything, and take impulsive action without pausing to think about the potential consequences. Adults calm themselves, collect more information before taking any action. 

This behaviour I found among many investors. Suddenly, they got a call and someone is saying that the price of such stock is going up. Immediately they gave a buy order without a second thought that whether the information is correct or not. Without checking the fundamentals of the company. The impulsive behaviour provokes them to take action without thinking about possible consequences which are likely to incur if the said information is not correct. 

4. Blaming Others: Children blame others when anything goes wrong. Adults try to identify the problem and look for solutions. 

When investors buy stocks on the recommendation of others and prices start falling, immediately they start blaming others. While a mature investor tries to identify the reason for a price drop and decide whether it is a buying opportunity or something that went wrong in the company.

5. Unable to Face Reality: Many times, children speak untruth to stay out of trouble. While grown-up ready to face the reality. 

When markets are performing better, many investors put borrowed money in the stock market. Sometimes they made money and later many start gambling. When anything goes wrong, they try to hide such kind of information from their family and friends, not ready to accept their mistakes, start speaking untruth and try to avoid themselves from that situation. They are still not grown-up who is ready to face the reality.

6. Comfort Zone: Children are unable to take a risk and they always look for protection and a comfort zone. 

Many investors feel protection and comfort zone when they know that their friends are buying the same stock or any big name has also bought the same. They feel the protection of their money. Without doing even one percent research of the company or even not opening the website of the company they bought the stock in bulk quantity and feel safe. The barrier of a comfort zone is one of the biggest barriers for an investor. To break the barrier, you have to do your research.  

7. Self-admiration: Children want that everyone will listen to them only. They feel very admired when elders in their family attentively listen their great job is done and they keep saying among others time and again. While psychologically strong people prefer to listen to others. 

The same behaviour I observed among many investors when they book profit in any stock. They start saying that how smart they are, how they book profits. The same tendency of self-admiration and keep saying the same event among their surroundings.  

Rather than admiring their small success here and there, psychologically strong people utilize the time for their bigger goals. 

The Bottom Line

To leave the childish mentality is difficult for many investors. We all learn from our mistakes but if you will stick with the childhood mentality then you will never learn from your mistakes. Children’s thinking is shallow, they cannot go deep because their mind is not yet developed. Your childish mentality will not allow you to go in deep if you will trumpet your small success in stocks here and there. Why because you have not gone deep repetition of success is difficult, soon you will suffer loss. 

As our body requires food, feeding of mind is also necessary by good learning.