When I was 13 years old, I started currency trading for the first time. Well, actually my dad managed to convince my mom that it would be a good idea to give me some money to learn how to trade in various monetary funds, such as the Japanese Yen, while I was too young to really take chances with what seemed like such a huge sum of money, I did end up learning a very valuable lesson.
After my dad became frustrated with my inability to take a risk with the money, he took over and invested it in the aforementioned Yen. Things started out fine; the first week rolled on by and he actually was making some decent money. However, as happens so often in fast moving markets, things went from profitable to losses very quickly - and after 2 weeks, the brokerage firm was calling asking for more money to cover the losses. Still, despite the bad financial news coming out of Japan, he still insisted on holding on… and what started out as a $15,000 investment soon became $20,000. It was around this point that arguments started and sleepless nights became the norm, as my father refused to sell but had to keep sending the brokers money as the Yen continued to fall.
At the end of the day, my dad gained a lot of grey hairs, and had to send the brokers another $5,000 before he finally gave up and sold.
Seeing all this taught me that when it comes to your business and your investments, your ability to keep your cool and stay unemotional is perhaps the most important character trait you can instill in yourself if you want to be successful.
When things are going well, it’s very easy to get greedy and hold out for more money; from our own experience in December 2006, Dave and I were discussing the possibility of selling our myspace graphics site because we felt the rankings were a little shaky and we were feeling something bad was in the works. However, we got greedy, thinking the site with its large amount of search engine traffic was worth scads of money, so we held off only to have the search rankings melt away in early 2007 and all that value wiped out.
What can you do to stay unemotional? Honestly, it’s almost impossible for most people, but I have found that if you set (reasonable) goals and stick to them no matter what, then yes, you may miss out on some things but you’ll also save yourself from a lot of trouble.
Try to look at things from a strictly numbers perspective. If you say “I will sell this fix and flip website when it’s earning $200/month for 3 months straight”, then sell it when you accomplish that goal: don’t get greedy. The same goes for when things go bad on a project: don’t become so attached to your investment that you can’t let go, if and when things do spiral out of control. Set your limits ahead of time and you should find it easier to stay in control.
The experts generally say you should only invest money that you can afford to lose, and while that’s great advice, I don’t really believe that many of us follow it. So if you must invest, please don’t invest your rent money in websites.