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The Pain VS. Gain of Investing


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73 stocks were trending in the Energy Sector at the end of the day on Friday, February 11, 2022

Penalties and rewards – losses and profits – negative and positive implications

The pain and gain that matter to us are very motivating. I mention pain first as a reminder that people can be more motivated, often two or three times more motivated, to avoid pain than to seek a gain.

I realized this early in my career. I found myself in a situation in which I was trying to convince a group of our senior executives of the value of installing a new software system that we were developing. I described the benefits that it would deliver but I got a cool reaction. Why? They were good benefits.

Then I realized: 1. The benefits didn’t accrue to them personally; 2. They would have to endure a lot of change, including the expenses, associated with installing a new system. The pain of cost and change outweighed the perceived gain, or value.

I changed my approach to focus on the impact of Not installing the system. I stressed the fact that DuPont, a big competitor, and others were developing similar solutions. When those solutions were up and running, it would allow them to gain market share at our expense. Now the reaction was much different. Their bonuses were directly impacted by market share. The scale had tipped.

Over the years I have observed that many people would love to have the benefits that successful investing can provide however, the real fear of losing part or perhaps all their savings keeps them on the sidelines.

As a result, they stayed with options that they thought would be safer but delivered much lower returns. Why? They certainly desired higher returns and might have even needed them. The Pain vs. Gain dilemma. The pain/fear of potential loss was greater than the gain associated with greater returns.

We have faced this dilemma, too, as buy and hold investors who lost a great deal in the market downturns (some might say ‘crashes’) of 2000 and especially 2008. And this was real pain.

We are conservative by nature and needed to find a way to invest that allowed us the opportunity to “gain returns” and also manage the fear and very real pain of another downturn.

We found the answer in the Trend Following strategy and its focus on Risk Management.

It starts with determining your personal risk tolerance, then only invest in stocks that are performing, i.e., trending; always set a trailing stop loss order consistent with your risk tolerance to avoid a big loss; ride the winners and cut losses; and keep repeating. And sleep better, too!

TrendingStocks.IO can help by identifying trending stocks in every sector at every price point and even calculates a stop loss position. Additionally, our proprietary Trade Risk Calculator can help you make decisions based on your personal risk tolerance.

If you haven’t signed up for our no commitment 4-week free trial, now is the time to give it a try and experience the benefits of taking emotions out of investing.

Remember – Ride Your Winners and Cut Your Losses!

Trending Stocks is an information platform only. Information provided on both the website, through the reports, The Trend and Trend Tidbits is meant to help users with their own analysis and strategies. Users are solely responsible for their investment decisions.

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