Should you trust in your gut instinct in investment?

When it comes to the matter of investment, the billion dollar question is whether we should trust in our gut instinct.

There are many people who defy the odds, and make million of dollars from a few investment decisions.

When their investment consultants tell them not to buy a certain stock, and the newspapers are full of negative comments about the company, a little voice tells the investors to go ahead and buy.

They reason that when the stocks are cheap, they would not lose much even if they lose money.

Their gut instincts told them to go ahead and buy.

The stories we read usually have good ending.

These are the ones who trust in their gut instincts and become rich.

Those who trust in their gut instinct and get poorer definitely will not write a book.

They definitely do not want to write about how they use up all their investment income or savings to bet on the wrong investment.

All their friends, and investment experts will tell them that they deserve to lose money, since everyone warns against the purchase.

Trusting in gut instinct proves to be the downfall of some rich people.

A single bad investment can mean the end of their companies, and they even have debts after selling everything.

However, for some people, their gut instincts are well honed,

So the question is: should you trust in your gut instinct?

That depends in your training, knowledge and emotional makeup.

Sometimes when you are emotionally charged, you think that is your gut instinct telling you to do something, but in reality, that is your emotions at play.

It happens when the stock market is at a strong bull run or during a crash.

The worst is when we read all the positive comments or negative sayings in the newspaper, forums and TV.

We get ourselves emotionally charged.

In a bull run, we tend to get infected with the positive mood, and think that things are very rosy.  We never stop to think that the share price is too high, and the listed companies are not really that attractive.

When you feel the strong urge to buy, that is not the voice of gut instinct.  That is your emotions, which are corrupted from the mood of the others.

The gut instinct of the wise investors probably tell them to sell, and to stop buying.

That is why the rich investors are always out of the stock market earlier than the others.  They do not get caught when the stock market crashes.

How can you train your gut instinct?

You have to know the fundamentals, and to understand how the market reacts to a piece of good or bad news.

You have to know how the market reacts to the comments made by the politicians.  Once you have enough experience, you can feel the shift in the market movement, even before the analysts write anything about it.

Bear in mind that the analysts are employees, and they do not really write about how they feel about the market.

Once you have the wisdom to know where a particular person comes from, you will understand why his opinion differs from others.

That is the right way to hone your gut instinct.

Nobody can make right decisions most of the times if they do not have enough knowledge and experience, especially where money is concerned.