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ing. Very quickly we can know a lot about the stock. Expert and amateur opinions are widely available with just a click on a handful of bookmarks. There is no need to dig for information. |
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The point is, having this instant information at our fingertips encourages us to go ahead and jump in rather than to take some time and think about it. And because of this, many will find themselves in positions that two weeks later they will be wondering how they got into. |
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And this is actually a fair amount of research compared to those who buy stocks on a tip or a message board comment where they have absolutely no idea what the company actually does but are still willing to jump in. They will put more consideration into the color of their new car than what risks they are taking in committing large sums of investment capital. |
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Since there is no logical explanation for this lack of consideration before making an investment, we need to call on a psychological one. |
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And that would be the uncomfortable feelings of being unsure of ourselves if we spend too much time investigating a stock. Whereas we would think that we would feel more comfortable with more information, for some this just isn't true. They actually get more anxious with more information because the information only serves to confuse them and create uncertainty. |
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So, like other decisions in life that make us uncomfortable, it is easier to simply take a leap rather than tolerate the discomfort of not knowing. If you think about this explanation, you may remember an instance in your own life where it was true. It is easier to jump into something with limited information than tolerate the anxiety of having to slowly learn something new and then make a decision, even though we may be unsure about the correctness of that decision. |
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The other part of this phenomenon is that it's just as easy to change our minds and get out if it doesn't pan out, and it doesn't cost much to do it. This "easy ineasy out" mentality is the delight of online discount brokerages. The whole emphasis on becoming more disciplined traders is simply to counter the ease with which we may get carried into the tide of emotions on the one hand, and inconsistent, haphazard decision making on the other. |
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In trying to be mentally disciplined, some investors like to rely strictly on various technical indicators, letting the numbers tell them when to enter and exit positions, rather than making subjective decisions. They simply follow what their charts tell them. Others read |
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