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NeuroInvesting: Build a New Investing Brain by Wai-Yee Chen

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CHAPTER 6

Are Fears Bad?

FEAR TAKES THE ROLE YOU GIVE IT

If fear is a part of me, then should I be afraid of fear?

You should, if it causes you to act in ways or make decisions that you otherwise wouldn't, if not for fear. Fear may cause you to choose the lesser outcome. It pushes its victim to settle for that which gives peace of mind and certainty, but at the expense of the optimal state, both financial and emotionally.

On the other hand, if you are one who thrives on uncertainties and makes money by assuming risk, then you need to have fear. It acts as your leveler; a check and balance that brings you back into the zone of safety. For these investors, fear is actually a gift that contributes to wiser decisions and safer trades.

So, are fears bad? It depends on who is holding the bow.

Let's look at some incidences where fear hurts the investor.

Passing Up Good, Profitable Opportunities

An investor who is motivated by fear evaluates all investment opportunities from the position of “How much might I lose?” All opportunities are colored by fear. The considerations can be What's the prospective loss? What's the catch? What can go wrong? and How much can I lose? Once opportunities are evaluated from this fear-filled perspective, investing (which involves risks to begin with) seems pointless, even the best conceived and calculated ideas. Why take this position or invest when you stand to lose? Isn't it better to do nothing and lose nothing? I want to make money, but I don't want ...

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