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Robert W. Siroka: Why Do Investors Have Such a Hard Time Selling Investments?

The following wisdom from Dr. Robert W. Siroka is insightful for readers. He speaks to the issues trend followers solve:

Why do investors have such a hard time selling investments? In the time-honored tradition of answering a question with a question, let me start my response by asking: “What does money represent to you?” Does it mean security? Achievement? Freedom? Money may mean all those things. Research and clinical findings indicate several conscious or partly conscious emotional connections to money, including love, self-esteem, power, control, status, attractiveness and sexuality, competition, envy, revenge, fear, guilt, shame, excitement and depression. What does this have to do with the difficulty in selling? Consider that our emotional relationship with money influences the sell decision. While Economics 101 teaches that man is a rational maximizer operating in a calculating, self-interested mode, we all know that’s not always the case. After all, clients (and financial professionals) often act irrationally by dumping a “good” stock after a market correction, holding on to losers (which might come back) and selling winners early. Selling involves change, and change generates anxiety and fear. Anxiety is a vague, worrisome, pervasive sense of alarm. Fear has a specific object or situation connected to the emotion. In practice, fear and anxiety frequently overlap. But since fear involves a specific object or situation, it may suggest a course of action, whereas anxiety is general and pervasive and suggests no easy out. The change involved in the decision to sell provokes both fear and anxiety because it always involves some form of loss, whether it is a decrease in an investment’s nominal value or abandoning hope for further gains. Oddly enough, even if an investor profits from a sale, the event triggers negative emotions. He or she may feel the loss of further gain and experience separation anxiety. If investors break even through a sale, they may feel frustration and impatience. And if they sell at a loss, they will feel the obvious emotions of regret, anger, disappointment, shame, guilt and a desire to get even.

The ability to handle the emotions, indecision and uncertainty described by Siroka is built into any good trend following plan. The naysayers will argue that Siroka’s statements sound great on paper, but don’t work for everyone. Trend followers, and all great achievers, would disagree with that kind of excuse. They would agree with Ayn Rand’s passion to make it happen:

That something happened to you is of no importance to anyone, not even to you. The important thing about you is what you choose to make happen – your values and choices. That which happened by accident – what family you were born into, in what country, and where you went to school – is totally unimportant.

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