In a nation of consumers, what is the driving force behind what people purchase and what they leave on the shelf?
What prompts a person to buy something?
Is it want? Is it need?
Yes, it’s both of these things, but it’s more than that…
It’s emotion.
People don’t buy things because of the flavor, color, style or texture. They buy things according to how it makes them feel. This emotional motivation runs the gamete of goods – from food, to clothing, to entertainment, to cars, to houses, etc.
For example…
This morning, I bought a bagel and some egg salad from a local deli. I figured I’d eat the bagel for breakfast and the egg salad for lunch. But, taking the “food for fuel” part of the equation out of it – why the bagel and not a muffin? Why egg salad and not tuna salad? I like these alternate items equally, so what prompted me to make my decisions?
Well, the bagel is heartier than a muffin. Unless you have it scooped out – this scooping out makes it significantly lower on the calorie count than the muffin – and as somebody that is almost obsessive about their weight, the lesser of two evils seemed to be the appropriate choice. Less calories now, means less guilt later.
The egg salad? My mom’s egg salad always made me happy… it tasted like home. Like love. I saw the egg salad this morning – and having a more emotional week than normal – I wanted a taste of home.
All my purchases, made on emotion. It’s very rare to find somebody that doesn’t buy things based on emotion. They’re out there, but for the most part, every choice we make is based on emotion…
Except when it comes to stocks.
Don’t get me wrong, there are some people who buy stocks based on emotions, but these are the people who are willing to take a loss for a product or company they believe in…
A real shark doesn’t care about how owning a piece of a company makes them feel, they only care about one thing…
Profits.
Most investors fall under this category. They care very little for what the company does, their corporate structure or their global environmental impact – sharks only care if a company will make them money.
Now, making money is an emotional motivator as well. More money means you can buy more of the things you like…
Money means power. Power to do what you want, to buy want you want, when you want it. The more you have, the more powerful you are, theoretically speaking.
But the stocks that are bought and sold on a daily basis? I’d say about 90% of them have zero basis in the realm of emotional purchases. They’re bought and sold because they either make money or they don’t – plain and simple.
Whether that money’s made over the short term or the long run…
It comes down to dollars and cents. And to investors, if it doesn’t make dollars, it doesn’t make sense.
Stocks may be the purest purchase one makes…
There’s no hidden purpose. They’re bought because of their ability to put more ducats in your pocket. Easy, peasy, lemon squeezy…
I like simple things…
So it makes sense as to why I was attracted to this line of work. I don’t have to worry about convincing somebody emotionally why they should or should not buy a stock. I simply present the facts as to why I believe a stock will make money or why it won’t.
It’s hard to argue with facts, with numbers. It’s black and white. Or I should say, black and red.
Take a look at your portfolio…
See if you can weed any emotional purchases out of the bunch. Track their performance. Have you held on to them even though they’ve made little to no money? Or worse, lost money?
If they have…
It may be a good idea to get rid of them. Keep only the stocks that have the chance to make you money – flush the refuse – make your stock buying decisions with your head and not your heart.