We all know that it’s unproductive to think, “If only I’d bought here or sold there.” Or “If only I picked up Network Appliance before it bounced back instead of selling it into its bottom” – if only, if only, if only. These two words have no place anywhere near your portfolio, Cramer says.
People don’t spend enough time talking about the psychology of investing. The pressure of owning stocks and having to make decisions about whether to buy or sell them is intense. It’s scary. Being an investor is emotionally brutal, but very few people ever talk about that side of stocks. Oh, they’ll talk about earnings and expectations and comparisons – all the rational stuff – but none of that matters if you can’t get your head under control.
As an investor, you can’t afford to be thrown off your game, but at some point you’ll come down with a case of the woulda, coulda, shouldas. So you need to be proactive when that happens. Cramer will take an offending stock off his monitor or portfolio watch – anything to get that stock off his mind so it doesn’t cloud his judgment on his other picks. The worst thing you can do is let a mistake undermine your confidence.
Now this doesn’t mean you shouldn’t evaluate your performance. You have to review what has worked in your portfolio and what hasn’t. But letting your screw-ups undermine your self-confidence won’t make you a better investor.
Bottom Line: You know this already, but that won’t stop you from doing the woulda, coulda, shoulda, every time you get something wrong. You need to be aware of the sometimes grueling emotional side of investing so you can stop yourself from wasting time and energy beating yourself up. Use that time to think, use it to do homework, use it to try to make money.
Questions? Comments? madcap@cnbc.com