Don’t let fear of failure stop you in your tracks

We’ve all experienced the pain of doing the homework, finding a stock we like and still missing out on great returns. The problem is usually our own uncertainty, our fear of being wrong.

How do we solve this?

I’ll start with a caveat. I want to buy stocks that are going up. Those that are falling worry me, because how much further can they fall? The answer, often, is a lot. So, if I like a stock that is falling, I’ll wait for an uptrend to resume and will then usually buy on a breakout higher.

But back to that stock moving higher. One option is to chase it. This, of course, depends on how much more we have to pay. A few percent, sure. But if it’s 30%, 50%? Not so fast. At that level the valuation is materially different and even if it still offers some value, we’ve missed a lot of the return and our margin of safety is gone.

The point is that a rising stock should not be scary. This is why we’re investing, and the best way to get over our fear is simply to buy.

It’s the emotion behind it that matters. Perhaps we paused buying because of fear, or worrying that we were wrong. But by pushing through that fear and buying, we build confidence in our ability. Remember that the downside risk in investing is 100% total loss. Nasty, but the upside potential is unlimited. And everything is scary at the beginning.

Getting over fear

Doing the research and buying immediately builds trust and confidence in ourselves. It’ll take time, but it will happen. Truthfully, maybe it’s a small position. But now you’re in and keeping a beady eye on the stock, looking for new entry points.

If it really runs and I miss getting a full allocation, then I set levels and wait. There is always a level at which a stock is attractively valued. I’ll set an alert and wait for it to trigger.

If it never triggers, remember that every set of results is a reset of your valuation and may indicate that paying a higher price is worth it.

I also want to remind readers that every 10-bagger was first a one-bagger. In other words, missing out on the initial run may feel horrid – but, if you’re right, this is just the beginning of a journey that will play out over years.

The point is to be less afraid of buying immediately because we’re worried about being wrong. This is part of what being an investor is all about – being wrong and being comfortable with that fact. It’s a strange place to be, and the best way to get over the fear is to do what scares us. When we decide we like a stock and it meets our criteria, buy some.

This story first appeared in the Financial Mail. Currency and the Financial Mail are part of the Financial Mail Group.

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