Fear and greed: releasing the past, looking towards the present and the future

As you travel along this journey towards financial freedom, have you ever encountered situations where you lost money on a bad investment, an expensive item or by lending people money which was never returned back to you?

Fret not as what was lost can still be found in the future IF YOU LET GO and look to the present and the future!

Fundamental principles for financial freedom remain
The fundamental enduring principles that guide you in your quest to achieve financial freedom does not change. It is still about living within your means, saving and investing wisely. Even the mightiest investment gurus such as Warren Buffet and Peter Lynch admit that they too are human and make wrong investment decisions too. The difference is that they make far more correct decisions that pay huge returns compared to most of us. What happens when we make wrong investment decisions and lose money?

To err is to be human
I punt in the Singapore Exchange on equities. If you have punted in the stock market, you will realise you can make profits and you can make losses too and sometimes both on the same day! And one of the worst feelings you can get is selling and seeing the price of the stock that you sold skyrocket! This has been happening with increasing regularity this past few months because of the buoyant stock market. China Aviation Oil is one counter where I missed the boat. :-) I had bought in at SGD 1.04 when I heard from forums that it was a growth story given its restructuring woes were over after they had settled with their creditors. The price bounced around a little and shot up to SGD 1.17 and I sold out. Now, roughly 3 months later, its share price is SGD 2.94! --A whopping 182% return when I went in at SGD 1.04 per share.

Everyone regrets
To say I did not regret selling would be a lie. Of course I did! But I was also happy that I made 12.5% return (non-annualised) in a short period of a few weeks! There in lies the danger and risk of punting, greed telling us that you should not have sold, you should have waited for bigger and bigger profits! That is the emotional and risky part of you that is talking. To continue to be successful in your daily journey towards financial freedom, you must be able to let go of that greed and be satisfied that capital was preserved, a return of more than 2x the prevailing fixed deposits return was achieved (my own targeted returns) and that your cash is freed for safe investments or for the next punt based on market conditions.

It is only with releasing the past, letting go of the "if only I..." and focusing on the investment opportunities in the present and the future that we will have the mindset that facilitates our daily progress towards financial freedom.

So far, while I have not made the type of triple digit returns on investments, my overall investment returns have managed to hit the double that of prevailing fixed deposit rates. It is not sexy but my portfolio allows me to sleep very well at night and to still participate in a market rally.

Lost and found
Losing further profits from selling some of your shares early results in lost potential earnings. But remember, no-one can predict the future and profits locked in are real and tangible while possible future profits can sometimes turn into paper losses when the market corrects or worst, into realised losses if you trade on margin or do not have holding power.

Remember, what lost profit can be earned back tomorrow slowly and steadily through treasury bills, time deposits and savings. Be aware of the human tendencies for greed to want to lock in gains only when the price is the "highest".

Be well and prosper.