Stock Market Explorer

Posted on 16 Oct 2008

When i'm standing around at Starbucks waiting for my Americano I always take a look at the headlines in the paper. And lately, I find myself feeling jolts of fear and hope as I read the headlines about the Canadian housing market. Last month, Canada's housing market was recovering, set to plunge dramatically, and ready for a soft landing. Check out just one week of headlines last month:

Each of those headlines instill either a sense of fear that the market is crashing and it's going to be ugly, or hope that the market is going to be o.k. and we will not suffer at all. But my emotional reactions to those headlines last less time that it takes for the Starbucks Barista to ask me if I want the extra shot in my coffee... you see, I know the objective of each paper is to sell more papers. And, the bigger the feelings of hope, fear or greed they can inspire the more papers they'll sell.

FEAR:

The feeling of Fear may cause an investor to panic and sell everything or, it can cause them to freeze in fear of taking any action at all terrified it will be the wrong thing to do. Either way, you're not doing the right thing. If you do nothing then you aren't moving towards your goals, and if you panic then you'll be following the herd of people using the headlines to make their decisions. And you want to buy when THOSE PEOPLE are selling, and sell when they're buying!

HOPE:

Hope often leads to making decisions without all the details. Your friend buys a stock and says the price is going to rocket to the sky, and you buy it with the hope that they're right. You read an article in the paper that says that King West in Toronto is going to be THE Hot Spot to live in next year, so you buy a condo there hoping that the article's prediction comes true. Ever heard the saying "hope isn't a strategy"?

GREED:

When the market is going up, investors will overextend themselves only seeing the money they'll make not the risk they're taking. they'll make hasty decisions for fear of missing out on the next big gold rush of an investment. The market's been going up and up, and they think they've to get in at any cost and want to make the money that everyone else seems to be making. The next thing you know, the market cycle starts heading downwards and everything flies apart.

So, you can now recognize the three destructive emotions for a real estate investor. But what can you do to help keep them from controlling your decisions? It's simple... you only have to do one little thing!!

Set your real estate investing goals and evaluate everything you do against those goals.

One of my favourite quotes comes from Alice in Wonderland:

"Would you tell me, please, which way I ought to go from here?"

"That depends a good deal on where you want to get to," said the Cat

"I don't much care where..." said Alice

"Then it doesn't matter which way you go" said the Cat

-Lewis Carroll, Alice in Wonderland

You will avoid making decisions based on fear, greed and hope if you know where you want to go. you'll look at the potential real estate purchase or sale, check it against your goals and your plan, and make your decision based on whether it moves you closer or further away from your goals.

And if you do that, you can ignore the media! It doesn't matter if everyone else is terrified, hopeful or filled with greed. you've a plan and are working towards that plan. you'll seek out specific deals with criteria from your plan, and if something meets your criteria you'll buy or sell, no matter what the headline says is happening.

Julie is passionate about real estate investing and helping others make money with real estate. She spends her spare time writing about real estate, and has created a free guide to help you get started in real estate investing. Get her Rev N You with Real Estate Starter Tips and a Free E-Mail Newsletter at http://www.revnyou.com