Selling: The Emotional Response

What is it that makes us human? One could argue anything really. It could be our ability to adapt as mammals to new situations. It could also be our ability to feel emotions beyond that of the initial origin. The point is that being human comes with many advantages but also with some clear disadvantages. Sometimes however, they can be one and the same.

One of these advantageous disadvantages is our ability to feel emotions on a higher level and to learn from them on an IQ level that is above that of other species on the planet. By having this ability we can think, reason, and make judgement calls based on it to predictably influence our future course or direction. When this is applied to stocks our minds can play tricks on us. Did you know that the human brain can experience pain much stronger than it can experience happiness?

The feeling is a gut response by your sympathetic nervous system that makes sure that if something bad happens in your life, you may be smart enough to avoid it next time. This is a serious advantage when it comes to learning lessons in the stock market. If we make a bad pick, we can learn from that pick and how to avoid it next time (to a certain degree). This however is also a double edged sword, as I motioned to earlier in the article. By having this ability, we can also be tricked by our own minds.

Investing Class

Try not to be alarmed when you start seeing me post new pages on the side of the blog that make you feel like you've returned to college. My brother has almost zero investing knowledge and I offered to help by breaking a lot of it down, step by step for him. If you feel like you could gain from any extra knowledge that is presented, please feel free to read it as it is posted. I am hoping to post about one a week as he will be able to use it during his time in the desert (Middle East on deployment). The plan is to go step by step through all of the material that you would have to memorize in order to become a register investment adviser. By presenting this knowledge to him and writing it all myself, both he and I should gain a few things. He will gain a very good base of investment knowledge that spans the most important styles of investing and the terms most used by investors world wide. I on the other hand will gain a deeper understanding of the topics and at the end I should also be ready to sit for the Series 65 as the material will all have been covered other than the most up to date tax/investing laws that have been placed into effect.

Anyways, these articles should start showing up on the side of the blog soon and they will be exclusive to this blog. I won't be posting any of them to Seeking Alpha as they are closer to me and are intended to only be used by my brother to understand the world of investing. Thanks for reading. 

Collateral Learning

Once in awhile when you're evaluating a stock for purchase, you find something that reminds you that investing is not just about numbers. When you invest, if you do the research that you should be doing, you learn more about the world and various sides of business that without researching you would never have run into without luck. This is because when you start to research a company, you have to really research it. You have to look into the various sides of the business, how they make their money, what affects that income, and if that income will continue. This means you have to understand every side of their business and in that way understand another side of life that you wouldn't normally.

This happened to me just last night when I was digging into ARLP (Alliance Resource Partners L.P.). Their insanely high dividend yield caught my eye and I saw that they were very much on discount. The thing that I liked even more was that their income just kept rising, year after year, without fail. When I normally run into that sort of thing, it means good things for the future. Even though the payout ratio was way over 100% which would normally turn me the other way and running at full speed, it was hard to think about not throwing some money at it because it almost seemed like a sure bet with their income constantly on the rise that they would eventually level that out.